Preamble

[Mr. SPEAKER in the Chair.]

Oral Answers to Questions — CHINA (HARBOUR AND CUSTOMSCONTROL).

Major-General Sir Alfred Knox: asked the Secretary of State for Foreign Affairs (1) whether the marine lighthouses, harbours and pilotage departments in China are still controlled by the Inspector of Customs;
(2) whether the Inspector-General of the Customs in China exercises control over the Customs in occupied areas?

The Secretary of State for Foreign Affairs (Mr. Eden): The Inspector-General of the Chinese Maritime Customs appointed by the Chinese Government continues to administer the Customs service throughout China, including the Marine Department, which deals with lighthouses, aids to navigation and harbour services. In the Japanese occupied areas, however, he has to take into consideration the requirements of the occupying Power. Harbour control and pilotage in the occupied ports have largely been taken over by the Japanese naval authorities, either independently or acting through the Customs administration.

Sir A. Knox: Does the right hon. Gentleman realise that Sir Frederick Maze is putting up a single-handed fight for our interest in the Far East, and will he do everything possible to help him?

Mr. Eden: I will certainly join my hon. and gallant Friend in paying the warmest possible tribute to the work Sir Frederick Maze is doing.

Oral Answers to Questions — ANTI-NAZI GERMANS.

Commander King-Hall: asked the Secretary of State for Foreign Affairs whether he will give favourable considera-

tion to the creation of the status of Free German, such status only to be available to German citizens who can satisfy His Majesty's Government that they were actively hostile to the Nazi regime previous to 3rd September, 1939?

Mr. Eden: The position of those Germans who are hostile to the Nazi regime has frequently been considered, but I do not regard the creation of a special status of Free Germans as either practicable or advantageous.

Oral Answers to Questions — ICELAND.

Mr. Mander: asked the Secretary of State for Foreign Affairs whether he has any statement to make with reference to the present international position of Iceland, the form of government there existing, and their relations with this country?

Mr. Eden: Iceland is an independent country, with a Government responsible to the Althing, or Parliament. Hitherto relations between Iceland and Denmark have been governed by the Act of Union of 1918, by which Iceland enjoys complete autonomy under the sovereignty of the King of Denmark, who is also King of Iceland. The Althing, however, recently passed three resolutions. The first declared that Iceland has acquired the right to sever the Act of Union owing to Denmark's inability to conduct the affairs which it undertook to perform under the Act, but that formal severance should not take place until the end of the war. The second stated the intention to appoint a Regent for one year at a time, and the third announced that a republic would be declared as soon as the union with Denmark had been formally severed. The relations between the Icelandic Government and His Majesty's Government are close and friendly.

Mr. Gallacher: Is it not the case that the Forces of His Majesty's Government have taken control of Iceland, in opposition to the wishes of the Icelandic Parliament?

Mr. Eden: No, Sir; it is not the case. What is the case is that a British garrison is temporarily stationed in Iceland, in order to prevent the occupation of that country by the common enemy.

Oral Answers to Questions — ALLIES (COLLABORATION).

Mr. Mander: asked the Secretary of State for Foreign Affairs, whether it is pro posed to hold meetings from time to time, as last week, of all the Allies, British, Dominion and foreign, engaged in the war?

Mr. Eden: I would refer the hon. Member to my concluding remarks at the inter-Allied meeting on 12th June which he will find in Command Paper 6285. I then said that it was not possible to hold such meetings continuously, but I hoped that that meeting might represent the inauguration of a new phase of collaboration and that it might form part of the machinery through which victory will be won and by which peace will be maintained after victory.

Mr. Mander: May I take it that these gatherings will be open to our Allies who have been fighting with us, such as those whose National Anthems are played on Sunday evenings?

Mr. Eden: Certainly, they will be attended by all of them.

Mr. Mander: My right hon. Friend will bear in mind that that does not apply to the meeting last week; and will he be good enough to rectify any absences that there may have been on that occasion?

Oral Answers to Questions — FOREIGN SERVICE (REFORMS).

Captain Plugge: asked the Secretary of State for Foreign Affairs whether the revised system for the Diplomatic Service will include provisions for ensuring that heads of missions abroad have expert advice on scientific and technical matters as well as commerce, finance, military, social and labour questions?

Mr. Eden: My intention is to ensure that heads of missions abroad receive such advice and assistance as is necessary to enable them adequately to fulfil their tasks.

Captain Plugge: Does my right hon. Friend not consider that, in view of what Lord Beaverbrook said on the air last night to America, he might in certain cases appoint a special scientific attache?

Mr. Eden: There might be occasion for that, but there will obviously have to be limits to the number.

Mr. Gallacher: Is the right hon. Gentleman not aware that the most important matter upon which advice could be given by missions abroad is that of conditions of workers and peasants, and will he see that workers from the factories are appointed to these diplomatic posts?

Mr. Liddall: asked the Secretary of State for Foreign Affairs whether, as part of the foreign service reform, he will arrange that the education of candidates shall be mainly by experience after they have left school rather than by the home Civil Service system, so that greater imagination, initiative and willingness to accept responsibility may be at the base of foreign service training?

Mr. Eden: While the details of the reform of the system of entry are still to be worked out, I hope to ensure that future entrants shall possess not merely the intellectual qualities and special knowledge necessary for the Foreign Service, but also the type of qualities to which my hon. Friend refers.

Oral Answers to Questions — MILITARY SERVICE (BRITISH SUBJECTS ABROAD).

Mr. Cary: asked the Secretary of State for Foreign Affairs whether he will consider the advisability of instructing diplomatic and consular officers to re-examine the passports of United Kingdom nationals living abroad, and who are aged 20 to 41; and, further, a passport shall not be declared valid until it is proved that the holder has no statutory obligation under the Armed Forces Act or has been discharged from obligation by some special provision of the Act?

Mr. Eden: British subjects already abroad at the outbreak of war are not liable for service under the National Service (Armed Forces) Act unless they left Great Britain after the date on which a proclamation was issued requiring men of their age to register for military service. British subjects between the ages of 18 and 41 who have gone abroad since the beginning of the war have done so under a system of exit permits. Where necessary, undertakings to return were obtained, and a careful watch is kept on such cases. Consular officers have no power to require British subjects to surrender their passports.

Mr. J. J. Davidson: Do those regulations apply to women, as well as to men?

Mr. Eden: I would like notice of that question. I think they administer the Act. If the Act applies to them the regulations would, too.

Oral Answers to Questions — ROYAL AIR FORCE.

FATIGUE DUTIES.

Mr. James Hall: asked the Secretary of State for Air whether he is aware that recruits to the Royal Air Force, who are passing through a course of specialised training, are occasionally called out of the class-room to do fatigue duty; and, as the loss of instruction jeopardises their chance of passing the final examination, will action be taken to prevent such interference with the men's duties?

The Secretary of State for Air (Sir Archibald Sinclair): Though all airmen must be prepared to perform general fatigue duties as may be required, directions have been given that pupils at technical training establishments are not, except in emergencies, to perform fatigues during instructional hours. If the hon. Member is aware of any case where these directions have not been complied with, and will furnish me with particulars, I will look into the matter.

Mr. Hall: May I have a word with the right hon. Gentleman after questions?

Sir A. Sinclair: indicated assent.

CIVILIAN TECHNICAL CORPS.

Mr. Wilfrid Roberts: asked the Secretary of State for Air what opportunities are open to technicians overseas to offer their services in the repair and maintenance establishments to the Royal Air Force in a civilian capacity.

Sir A. Sinclair: Skilled men overseas whose services are available, who possess the requisite qualifications and are otherwise suitable, are free to enlist in the technical branches of the fighting Services; but, in order to afford a wider opportunity for skilled technicians overseas to respond to the appeal which was broadcast last night by my noble Friend the Minister of State, His Majesty's Government have decided to establish a Civilian Technical Corps in which will be enrolled

men who volunteer to come to this country for service in the repair and maintenance establishments of the Navy, Army and Air Force in a non-combatant capacity. The corps is being established by the Defence (Civilian Technical Corps) Regulations, made under the Emergency Powers (Defence) Acts, 1939–40.

AMERICAN EQUIPMENT (GROUND PERSONNEL).

Mr. Granville: asked the Secretary of State for Air whether, in view of the fact that the Royal Air Force are using an increasing number of aircraft from the United States of America, he will consider sending to that country a number of technical and ground staff personnel, in addition to flying crews, for the purpose of first-hand training with American technical equipment?

Sir A. Sinclair: I appreciate my hon. Friend's suggestion, but adequate arrangements have already been made in this country for giving training to ground personnel in the use of American equipment.

Mr. Granville: As there are reputed to be seven ground staff, or technical men, to one flying man, has my right hon. Friend considered sending instructor-trainees to America to study American technical questions, and sending men from Canada into America? Can he give an assurance that technical training is keeping pace with aircraft and flying personnel?

Sir A. Sinclair: The answer to the last part of the question is, "yes." These facilities for training in American aircraft already exist in this country. We are very much helped by the fact that representatives of American firms are coming over here and giving us the benefit of their knowledge in instructing our people here. The courses have to be quite short, and it would be quite uneconomic to send our people over to the United States for this purpose.

Mr. Granville: Would it not facilitate matters if trainees could be sent from Canada into America, to obtain instruction which they could impart on arrival in this country?

Sir A. Sinclair: My hon. Friend does not appreciate that the needs have been met by the arrangements I have described


and the help which the Americans are giving by coming over to this country themselves and placing their services at our disposal.

Mr. Simmonds: Would my right hon. Friend bear in mind that it is much more important to have the American technicians coming over here? Would he see that they are attached to the first operational squadrons of each of the American types, so that those squadrons immediately have the benefit of those technical officers?

Sir A. Sinclair: I am in complete agreement with my hon. Friend; and what he suggests is, in fact, being done.

AERODROMES (REPAIR).

Mr. Simmonds: asked the Secretary of State for Air whether he is satisfied with the provision for speedy repair of aerodromes in this country which may be damaged by enemy action; and whether he is relying solely upon maintenance contractors for this work?

Sir A. Sinclair: The Air Ministry does not depend for the repair of aerodromes damaged by enemy action entirely on maintenance contractors, and some time ago units of the Royal Air Force were created, each of which is equipped with its own plant and machinery and able to execute emergency repairs where and when required in the minimum of time. This force works in combination with the civil repair organisation set up by my Department at the outbreak of war. This organisation consists of mobile works repair depots established in various parts of the country, self-contained as to skilled and unskilled labour and mechanical equipment.

Mr. Simmonds: Is my right hon. Friend satisfied that it is borne in mind that these repair organisations will very frequently have to operate under continued hostile bombardment, and, therefore, are all the details which are likely to be used in these contingencies being carefully worked out, so that there will be an operational code which will be understood in these emergency conditions?

Sir A. Sinclair: Yes, Sir, that is the object of the formation of this body to which I have referred, which is a uniformed and disciplined body and will

be available to be moved about from aerodrome to aerodrome wherever the need is greatest.

Mr. Granville: Can the Minister give an assurance that the defence of these aerodromes by panzer equipment is being carried out, so that it will not be necessary to destroy them?

Sir A. Sinclair: I do not think that that arises out of the Question.

Oral Answers to Questions — AIR-BORNE FORCE.

Mr. Lipson: asked the Secretary of State for Air whether, in view of recent events in Crete, he can give an assurance that all possible steps are being taken to expand and speed up the proposals for the establishment of a powerful British air-borne force?

The Financial Secretary to the War Office (Mr. Richard Law): I have been asked to reply. The lessons of Crete have been studied in detail, particularly with regard to the use of air-borne forces. My hon. Friend will appreciate, however, that it would not be in the public interest to divulge the policy at present being pursued with regard to the expansion of our own air-borne force.

Mr. Lipson: Can my hon. Friend give an assurance that there is close co-operation between the War Office and the Air Ministry in this matter, and that the difficulties which existed prior to the Cretan episode in respect of the establishment of this air-borne force have now been removed?

Mr. Law: Yes, there is the closest possible co-operation.

Mr. Shinwell: But does the hon. Member realise that it is in the public interest that we should have definite guarantees that effective action is being taken?

Mr. Law: The lessons of Crete have been learned, and are being inwardly digested. I do not think it would be proper to show the digestive processes at work.

Mr. Shinwell: Is inward digestion appropriate to the circumstances? Cannot we have something more than mere digestion?

Oral Answers to Questions — TRADE AND COMMERCE.

COLONIAL PRODUCTS (AMERICAN MARKETS).

Mr. Creech Jones: asked the Under-Secretary of State for the Colonies what steps have been taken by his Department to develop markets in and trade with the United States of America and the South American nations for Colonial products; and whether any arrangements exist in America for the supply of information to the American people on British Colonial affairs and the promotion of better understanding?

The Under-Secretary of State for the Colonies (Mr. George Hall): Colonial exports to America, and especially to the United States, are encouraged by all practicable means, such as the free grant of export licences, and the possibility of increased exports of a number of particular commodities has already been discussed with the United States authorities. An officer of the Colonial Office has recently been sent specially to Washington to continue certain of these discussions, and the Comptroller for Development and Welfare in the West Indies has also recently been in Washington on a mission. As regards the second part of the Question, certain steps have already been taken to inform American public opinion about British Colonial affairs, and I am sending my hon. Friend details of these. Other projects are now receiving consideration.

CLOTHES RATIONING.

Mr. Pearson: asked the President of the Board of Trade whether he is aware that it is a wide practice for school authorities to require pupils to have a specified clothes outfit and, in view of this necessitating the deposit of at least 50 coupons, will he consider making a concession to the extent of not requiring coupons for a a child's first clothes outfit upon passing from a primary to a secondary or senior school?

The Parliamentary Secretary to the Board of Trade (Captain Waterhouse): Children have the same number of coupons as grown-ups, but their clothing is rated at fewer coupons because they grow out of their clothes and are harder on them. Children, whether at school or not, who are too big to wear such garments will be able to get extra coupons

later. The pressure on supplies is such that my right hon. Friend would not be justified in still further increasing the ration to meet cases where school authorities may have prescribed an outfit that cannot be met within this ration.

Mr. Edmund Harvey: Will my hon. and gallant Friend consult with the President of the Board of Education about circularising school authorities with a view to their suspending these outfit lists during the present emergency?

Captain Waterhouse: Certainly I will consider that.

Captain Cunningham-Reid: asked the President of the Board of Trade whether he is aware that the regulation that knitting wool can only be obtained without coupons through the medium of the Women's Voluntary Service will virtually prohibit women knitting comforts for their own friends and relations in the Services, as garments, knitted with wool so obtained, have to be returned to the Women's Voluntary Service for distribution; and will he consider relaxing this regulation to avoid having to surrender one coupon for every two ounces of wool purchased in the ordinary way, as is the regulation at present?

Captain Waterhouse: This matter is under consideration.

Mr. Mander: Can the hon. and gallant Gentleman say how soon a decision will be reached, as this matter affects a large number of people throughout the country associated with churches and other organisations, who desire to continue the present practice of sending these things straight to their own friends?

Captain Waterhouse: I can assure the hon. Member that the matter is treated as one of urgency, but he will realise that there is a multiplicity of details to be gone through.

Captain Cunningham-Reid: Is my hon. and gallant Friend aware that he will have to surrender 11 coupons in the event of his having an aunt in the W.A.A.F.s and wanting to knit a sweater for her?

Major Milner: asked the President of the Board of Trade why, though recommending inquirers as to clothes rationing to ask for information from chambers of


commerce, no advance particulars were given to such chambers in order to enable replies to be given?

Captain Waterhouse: As the hon. and gallant Gentleman will appreciate, it was essential for the utmost secrecy to be observed in regard to the consumer rationing scheme before it came into force on 1st June. For that reason the Board of Trade did not issue advance particulars. In order to enable chambers of commerce to deal with general inquiries, explanatory leaflets were despatched to them on 31st May, and arrangements were made for representatives of the Board of Trade to address numerous meetings called by such organisations in the first week of the scheme.

Major Milner: Is the hon. and gallant Gentleman not aware that the particulars arrived two days late and that great annoyance and inconvenience were caused to traders? Is there any reason why chambers of commerce should not have been given the information along with the newspapers?

Captain Waterhouse: On the other hand, there is every reason why they should. If the hon. and gallant Gentleman will let me have information of late arrival in any particular case, I shall be glad to have the particulars.

Mr. Evelyn Walkden: Is the hon. and gallant Gentlemen aware that most of the representatives of the Board of Trade were unable to understand the scheme themselves and were certainly not in a position to explain some of the problems?

Captain Waterhouse: Secrecy had to be maintained. Virtually no one was taken into our confidence until the last few days. These gentlemen had a very short and cursory training, and I believe the general opinion of the country is that they did excellently.

Mr. Sorensen: asked the President of the Board of Trade whether he is aware of difficulties that have arisen respecting clothing coupons for patients in mental hospitals and other public institutions; whether he will determine the number of coupons that can be utilised by patients for private purchases, both for those who were patients before the beginning of rationing, and those voluntary or other patients who have entered these hospitals

since then; and whether coupons are to be surrendered for uniform supplied to male and female nurses?

Captain Waterhouse: Temporary inmates of hospitals and institutions are already in a position to purchase the normal ration, since they possess a Food Ration Book. The normal supply of clothing coupons will be issued to permanent inmates as soon as this can be arranged. In the meantime, hospitals of all kinds may, as a provisional arrangement, obtain their essential requirements by giving a formal receipt to the supplier. This latter provision enables hospitals to obtain supplies both for patients and for nurses. Similar facilities are available to institutions under local authorities.

Mr. Sorensen: Does the Minister realise that that does not quite cover my point? Will he consider this matter afresh, and also the possibility of circularising various hospitals in the country giving directions to them in a matter which has become very complicated?

Captain Waterhouse: Circulars will shortly be issued to hospitals dealing with their position under this rationing scheme.

CONCENTRATION OF INDUSTRY.

Mr. Mander: asked the President of the Board of Trade the present position with regard to the preparation of voluntary schemes for the concentration of industry; to what extent action has been taken, or is contemplated, on a compulsory basis; and whether it is desired that firms, whether within the group of specified industries or not, should submit their own voluntary schemes?

Captain Waterhouse: My right hon. Friend hopes to make a statement at an early date

Mr. Mander: Will my hon. and gallant Friend be good enough to answer the latter part of the Question?

Captain Waterhouse: I should prefer my hon. Friend to await the statement.

Mr. Mander: Is it not the case that the President of the Board of Trade has already made a statement bearing on the subject? What possible reason can there be for delay in answering the latter part of my Question? There is no question of statistics.

Captain Waterhouse: It is perfectly clear that if a firm in any industry likes to make arrangements, the President of the Board of Trade will welcome them, but we cannot go beyond that.

Mr. Mander: Including the obligation for nucleus firms closing down certain factories?

Captain Waterhouse: I cannot deal with that, pending my right hon. Friend's statement.

Oral Answers to Questions — TRINIDAD (FACTORY CONDITIONS).

Mr. Creech Jones: asked the Under secretary of State for the Colonies whether, in view of the recent inquiry in Trinidad into factory and workshop health, sanitation and safety conditions, steps will be taken immediately to give effect to the recommendations of the inquiry, including the establishment of an inspectorate of factories and workshops and a closer contact between the medical officers of health and the labour adviser?

Mr. George Hall: My Noble Friend has not yet received the detailed observations of the Governor of Trinidad on the report of the committee of inquiry. He is in communication with the Governor as to the action to be taken.

Oral Answers to Questions — WEST INDIES (INTER- COMMUNICATION).

Mr. Creech Jones: asked the Under secretary of State for the Colonies what steps have recently been taken or are being taken to improve inter-communication between the British West Indian Colonies?

Mr. George Hall: Although the need for improved inter-island sea transport in the West Indies is fully realised, it has not been possible in time of war to proceed with improvements. A British air service is now operating between Trinidad, Tobago and Barbados. It is hoped to arrange for this service to be extended to other West Indian Islands, but I regret that I am not yet in a position to make a statement on the subject.

Oral Answers to Questions — MALAYA (RUBBER ESTATE WORKERS).

Mr. Sorensen: asked the Under secretary of State for the Colonies what

action he proposes to take respecting industrial discontent in Malaya; whether he will cause a special inquiry to be made into the disparity between wages and the rising cost of living; is he aware that this is the basic cause of the discontent and that immediate steps must be taken to remedy this; and whether he is now in a position to publish the report from the Malayan Government?

Mr. George Hall: My Noble Friend is consulting the High Commissioner for the Malay States with a view to securing early investigation and conciliation by officers of the Labour Department in instances of labour unrest, and he has arranged for his Labour Adviser, Major Orde Browne, on the conclusion of his present visit to Mauritius, to go to Malaya, where his advice will be available to the Malayan authorities. I would remind my hon. Friend that, as stated in my answer of 28th May, the wages paid to Indian estate workers in the rubber industry include a bonus in respect of the rise in the cost of living. In addition, most estates provide further advantages, such as free housing, ground for grazing stock, education, and firewood, and make arrangements for the issue of rice to labourers at cost price. My Noble Friend has not yet received the High Commissioner's full report on the recent disturbances in Selangor.

Mr. Sorensen: Can my hon. Friend say whether the inquiry that is to be made, and which will no doubt give great satisfaction, will be entirely comprehensive of the political, economic and any other aspects of the difficulty, and can he also say when the report of the inquiry is likely to be available?

Mr. Hall: It will be a matter for the High Commissioner to decide as to the scope of the inquiry, and it is impossible at this stage to give any idea when the report will be available.

Mr. Creech Jones: Can my hon. Friend say whether part of the inquiry by Major Orde Browne will include existing industrial codes as well as the facilities of the trade unions to operate in times of trade disputes?

Mr. Hall: I can assure my hon. Friend that Major Orde Browne will take all these factors into consideration. He has, as my hon. Friend knows, had a very wide experience in these matters.

Oral Answers to Questions — COLONIES (NATIVE REPRESENTATION, GREAT BRITAIN).

Captain John Dugdale: asked the Under-Secretary of State for the Colonies whether, in view of the magnificent war effort that is being made by our Colonial Empire, he will consider the appointment from among the native inhabitants of each of our larger Colonies of a High Commissioner to Great Britain?

Mr. George Hall: My Noble Friend fully appreciates the war effort made by the Colonial Empire, but he does not think that any advantage would be gained by adopting the course suggested in the Question.

Captain Dugdale: Does not my hon. Friend consider that people who are worthy to fight by our side are also worthy to be represented in our capital?

Mr. Hall: It is not for lack of appreciation, but my hon. and gallant Friend will realise that that is opening a very wide question of policy.

Captain Dugdale: In view of the reply of my hon. Friend, I beg to give notice that I shall raise this question at the earliest possible opportunity.

Oral Answers to Questions — IMPERIAL DEFENCE (CONTRIBUTIONS).

Captain John Dugdale: asked the Under-Secretary of State for the Colonies the source from which the contribution towards Imperial Defence, made by the Governments of the Straits Settlements and of Fiji, was obtained?

Mr. George Hall: As the answer is rather long and contains figures, I will, with my hon. and gallant Friend's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

Contributions received by His Majesty's Government from the Government of the Straits Settlements towards the cost of Imperial Defence since the outbreak of the war have included two gifts of £1,000,000 from the Colony's revenue balances, $4,551,075 (Straits) which formed the proceeds to 31st March of an issue of War Saving Certificates on which the Colonial Government is accepting responsibility for the repayment of

principal and interest, and $5,108,710 (Straits), being the proceeds to 31st March of the taxation imposed under the War Duties Ordinance (1940) and later amending Ordinances. This legislation provided for an extra export duty of 5 per cent. ad valorem on rubber and for various increases in pre-existing import or excise duties and taxation on non-essentials as well as for certain new taxation of the same kind. None of these increases affect the subsistence cost of living for the poorer classes of the community. The Straits Settlements Government also issued a local War Loan of $25,000,000, the proceeds of which were transferred as a free gift to His Majesty's Government, the Colonial Government remaining responsible for the payment of principal and interest.

Before the war the Fiji Government made a small annual contribution of £5,000 towards Imperial Defence. This contribution was discontinued on the outbreak of war and in its place the Colony has accepted liability for various measures of local defence involving additional expenditure many times greater than their pre-war contribution for Imperial Defence. To meet this liability, increased taxation has been imposed, covering income tax, residential tax, entertainment tax, port and customs service tax and customs duty.

Oral Answers to Questions — CYPRUS.

FOOD POSITION AND EXPORTS.

Mr. Gallacher: asked the Under- Secretary of State for the Colonies whether adequate steps have been taken taken to ensure the provision of essential foodstuffs for the population of Cyprus as the war in the Mediterranean develops; and are arrangements made for the export from Cyprus to this county of its surplus citrus fruits and other produce?

Mr. George Hall: Yes, Sir. The food position in Cyprus gives no cause for anxiety. As regards the last part of the Question, I regret that the export of the products of Cyprus to this country has, owing to war conditions, practically ceased, but every endeavour is being made to dispose of them in markets nearer to the Colony.

CONSTITUTIONAL RIGHTS.

Mr. Gallacher: asked the Under secretary of State for the Colonies


whether His Majesty's Government will restore to the people of Cyprus the constitutional rights of freedom of the Press, organisation and assembly, taken away from them in 1931?

Mr. George Hall: In the present military situation in the Eastern Mediterranean, my Noble Friend is not prepared to take up these questions.

Mr. Gallacher: In view of our declaration of support for the statement that Syria should be given independence, would it not be a natural act for the Government to eliminate the Fascist dictatorship in Cyprus and re-establish the constitutional rule that existed there prior to1931? — [Interruption] —Why not?

Oral Answers to Questions — SIERRA LEONE (LABOUR DISPUTE).

Mr. David Adams: asked the Undersecretary of State for the Colonies whether he is aware of serious disputes which have arisen among the water-front and other workers of Sierra Leone, primarily due to low rates of pay and rising costs of living, and who allege that no medium for arbitration exists; and whether prompt steps are being taken to remedy the situation?

Mr. George Hall: Yes, Sir. The Sierra Leone Coaling Company's employés refused to work on 3rd June and walked out without making specific demands. I am glad to inform my hon. Friend, however, that the men returned to work in full strength on 8th June. They returned on condition that they should be paid at job rates, which are 33⅓per cent. higher than normal rates, pending the settlement of their dispute by an Arbitration Tribunal to be appointed under the Sierra Leone Trade Disputes (Arbitration and Inquiry) Ordinance, 1939. The Tribunal, with the Acting Chief Labour Officer as arbitrator, and with assessors nominated by the company and by the workmen, is now sitting. I am in communication with the Acting Governor regarding a statement which I have seen to the effect that the Sierra Leone Building Constructional Workers' Union and the Water-front Workers' Union have made representations for higher rates of pay on account of the rising cost of living.

Mr. Sorensen: Do I take it that the strike which took place by water-front

workers has been very successful and has justified itself?

Mr. Adams: When does the Minister anticipate that this information will be available?

Mr. Hall: We are hoping to get it as soon as possible.

Oral Answers to Questions — TRANSPORT.

RAILWAY RETURN TICKETS.

Mr. Higgs: asked the Parliamentary Secretary to the Ministry of Transport whether he is aware that transport undertakings refuse to relax their regulations regarding the use of return tickets which are available on the date of issue only; and will he consider extending their period of utility to members of the Auxiliary Fire Service and Home Guard when these men have been called out for service on raid nights?

The Parliamentary Secretary to the Ministry of Transport (Colonel Llewellin): The concession already announced whereby tickets at monthly return rates are available on the main line railways to full-time Civil Defence workers and to fire watchers has been extended to the Home Guard. I do not think that it would be reasonable to require that the availability of day return tickets should be extended as my hon. Friend suggests.

Mr. Higgs: Is my right hon. and gallant Friend aware that the majority of these men are giving their services, does he not consider it very hard that when they have been working all night they should have to pay their return fare, and will he give further consideration to this minor suggestion?

Colonel Llewellin: It is a question of pay. If they are working in their employer's premises all night, it may well be that the employer should pay the return fares and not put the obligation upon the railway company.

Commander Locker-Lampson: Is the principle of payment the right one?

Mr. Davidson: Is the Minister aware that at the present moment it is the men who pay, and will he make an inquiry into the matter with the object of distributing this burden among the proper people?

Colonel Llewellin: All I was anxious to point out was that, in my view, the people who should pay are not the railway companies.

Mr. Higgs: But it costs the railway companies nothing at all.

RAILWAYS (OWNERSHIP).

Sir Reginald Blair: asked the Parliamentary Secretary to the Ministry of Transport whether he will give an assurance; that no Government scheme shall be promulgated for any regrouping or alteration of ownership of the British railways before the Government has explained in detail to the country how those whose savings or corporate funds are invested in the railways may be affected and has obtained electoral assent for the changes contemplated?

Colonel Llewellin: No special undertaking seems to be required about the particular class of property mentioned while the existing Parliamentary safeguards remain in force.

Sir R. Blair: Is it not a fact that there are about 850,000 different stockholders in addition to many thousands interested in insurance companies, building societies, banks and trade, and in this democratic age ought they not to be consulted before any cut and dried scheme is produced?

Colonel Llewellin: Any scheme which is produced will have to have the sanction of this House.

FIRST-CLASS RAILWAY COMPARTMENTS.

Mr. Tinker: asked the Parliamentary Secretary to the Ministry of Transport whether he will give consideration to removing the term "Third-class passengers" on railways and having one class only, as this would help to remove the congestion caused by travellers getting in wrong compartments, and would also give better satisfaction?

Colonel Llewellin: In general the abolition of first-class accommodation would diminish the convenience of railway travel without providing commensurate relief in other directions.

Mr. Tinker: Has not the time come when we should drop this class distinction? We are fighting for a common cause;, and it is hard for Members of Parliament to see private soldiers pushed out of the carriage in which they are sitting to

some other part of the train. I want the Parliamentary Secretary to take note of this, because some change is necessary now.

Colonel Llewellin: It is not really a case of any class distinction. A large number of people now using first-class railway accommodation are on official business and do a good deal of work in their carriages, and for that reason I think such a distinction is necessary.

Mr. A. Edwards: Is the Parliamentary Secretary aware that I recently travelled in a crowded train on which an official of his Department occupied a compartment to himself? Is that justified?

Colonel Llewellin: If the hon. Gentleman will tell me the occasion, I will see that these compartments are not fully reserved in that way.

Mr. Edwards: I wrote a letter to the Parliamentary Secretary's Department a few weeks ago. The gentleman was Mr. Frank Pick.

Colonel Llewellin: I do not think the hon. Gentleman wrote to me.

Mr. Edwards: No, it was before your appointment.

Mr. Tinker: I beg to give notice that I will raise this matter again, on the Adjournment, at the earliest opportunity.

CARGOES (UNLOADING).

Colonel Arthur Evans: asked the Parliamentary Secretary to the Ministry of Transport whether he is aware of the incidents, of which full particulars have been sent him, where delay has arisen in the unloading of cargoes in a certain port, due in one case to the action of a shipping company who held up the discharge of a cargo of foodstuffs because immediate unloading would have involved work on Whitsun Monday and in another case to the dock labour refusing to work on the Tuesday after Whitsun unless they were paid time and a half; and, in view of the necessity for obviating congestion in our ports, whether he will inform the House what steps the Government are prepared to take to deal with such situations in the future?

Colonel Llewellin: I am aware that a small coasting vessel carrying 350 tons of sugar and 90 tons of beer was held up at


a certain port over the Whitsun holidays. It was not thought necessary to call upon dockers to forgo their Whitsun holiday in order to discharge this small cargo. It is true that on the Tuesday after Whitsun there was an unauthorised stoppage of work when certain men claimed for that day the holiday rates of pay which they would have earned had the ship worked over the Whitsun week-end. This incident is now closed, but I can assure my hon. Friend that action will be taken to prevent delay in unloading in any future case.

ROAD TOLLS.

Colonel A. Evans: asked the Parliamentary Secretary to the Ministry of Transport whether he is aware that, owing to the continued existence of the Penarth toll-gate heavy lorries conveying war material and foodstuffs, besides other vehicles, use the alternative route over Leckwith Hill, thus consuming additional petrol; and whether, in view of present conditions, he is prepared, in conjunction with local authorities, to take immediate steps in the public interest to acquire this and all other remaining toll-gates in the country?

Colonel Llewellin: I am making inquiries about the case in question and will communicate with my hon. and gallant Friend. It would be quite impracticable, in present conditions, to arrange for purchase and extinction of road tolls generally.

Colonel Evans: If that is impracticable, would it not be possible and, indeed, desirable for the Minister of Transport to arrange with the owners concerned that these toll gates should be thrown open for the period of the war, and for the situation to be reviewed thereafter?

Colonel Llewellin: I am looking into the particular case to which my hon. and gallant Friend has referred. It may be a case where something of this sort ought to be done.

Captain Cunningham-Reid: Does the continuation of these toll gates conform with modern conditions?

Colonel Llewellin: I have found that there are complications in this matter. The local highways authorities are the

people who have the power to purchase out the right of the toll-gate owner, and they do not wish in all cases to spend ratepayers' money on buying out these toll rights.

Mr. G. Strauss: But have not the Government ample powers to deal with this matter under Defence of the Realm Regulations?

Colonel Llewellin: In any case where this matter is holding up the war effort we should certainty do so. My remark referred only to toll gates generally, and some of them, by being toll gates, do not in the least impede the war effort.

Mr. Mainwaring: If the Germans landed, would they be charged admission?

RAILWAY SUPPLIES.

Mr. Summers: asked the Parliamentary Secretary to the Ministry of Transport whether he is satisfied that the pre-war practice of the railway companies in ordering supplies sold at a uniform delivered price, from sources which involve the longest carriage, has been abandoned?

Colonel Llewellin: I am informed that this is not and has never been the practice of the railway companies.

Mr. Summers: Is the Parliamentary Secretary aware that it is common knowledge in trade circles that this was the case before the war? Can he say that this practice no longer prevails?

Colonel Llewellin: I am told that the practice was to buy goods at the lowest tendered price. Obviously, in peacetime that was the best practice, but I appreciate that the practice to which my hon. Friend refers ought to have been stopped.

Oral Answers to Questions — MINISTRY OF INFORMATION.

RUDOLF HESS.

Captain Cunningham-Reid: asked the Minister of Information whether he will permit the publication of photographs of Hess since he has arrived in the British Isles?

The Minister of Information (Mr. Duff Cooper): No photographs have been taken.

Captain Cunningham-Reid: Is not one of the reasons why no photographs have


been taken contained in the sentiments of the: Parliamentary Secretary to the Ministry of Information, who recently said, "We cannot humiliate this fundamentally decent man by exploiting his situation for pictorial purposes "?

Mr. Cooper: That is not one of the reasons.

Mr. George Griffiths: Is it not a fact that the Lord Provost of Glasgow has taken his photograph?

POSTAL AND TELEGRAPH CENSORSHIP (STAFF).

Sir Percy Hurd: asked the Minister of Information how many men and women are employed in the postal and telegraph censorship of the Ministry in addition to the other 1,801 on the staff; what is the total cost in salaries; and are any further sums paid for services in connection with the Ministry's secret inquests or otherwise?

Mr. Cooper: The present staff of the postal and telegraph censorship is 3,808 men and 6,635 women. The total cost of the salaries of these persons is £2,196,000 per annum, while the salaries of the 1,801 members of the Ministry proper total £528,500 per annum. The Ministry does not conduct any secret inquests. The latter part of the Question does not therefore arise.

Sir P. Hurd: Is not the Minister himself conscious of the colossal numbers and cost, and is he considering how they can be brought within reasonable limits?

Mr. Cooper: The Postal and Telegraph Censorship inevitably employs an enormous number of people, and 1 think that at the present time it is more important to make quite sure that the work is being efficiently carried out than to reduce numbers.

Sir P. Hurd: But what about the other 1,801?

PUBLIC OPINION (INQUIRIES).

Sir P. Hurd: asked the Minister of Information on what subjects the Ministry have, directly or indirectly, sought to sound public opinion in the past three months; how many men and women have been employed in these secret inquests and at what approximate cost; and will

he place in the Library the resulting reports for the information of Members?

Mr. Cooper: With regard to the first part of the Question, I would refer my hon. Friend to the answer I gave him on nth June. The number of people engaged in studying and reporting on public opinion is 42, and the cost is £4,400 a quarter. As regards the third part of the Question, the arrangements made last summer to enable Members to see the reports of the War-time Social Survey at the Ministry of Information are still in force.

Sir P. Hurd: Does not the Minister realise that this snooping by officials in constituencies is repugnant to the elementary principles of representative government?

Mr. Cooper: This matter was fully discussed a year ago in this House. I do not know whether my hon. Friend was present then, but it was explained to the House and, I think, met with general approval. The matter has not been raised since. It was made plain that any Member who wished might come to the Ministry and see the reports, which are sent in from all over the country at regular intervals, in order that he might be reassured as to how the matter was being conducted. Many Members availed themselves of that offer, and they can still do so.

Major Milner: Is it not a fact that most useful information has been obtained but that the Ministry make no use of that information?

Mr. Cooper: We make the best use of it we can.

Mr. Mander: Can we see the snoopers too?

Mr. De la Bère: Did not the bud of liberty open with the English spring?

BROADCASTS TO FRANCE.

Mr. Crack Henderson: asked the Minister of Information whether all possible steps will be taken to prevent interference with our broadcasts to France?

Mr. Cooper: The technical means at our disposal are already being used to the very best advantage—and will continue to be so used with, it is hoped, increasing success—in order to give our broadcasts


to France as wide an audience as possible in that country.

Mr. Henderson: Is the Minister satisfied that all possible steps are being taken to deal with this most important matter and that no scientific step that is practical will be omitted?

Mr. Cooper: Yes, Sir.

Captain Plugge: Is not this situation very serious at present? Is it not a fact that owing to our not having sufficient medium wave-lengths, we have made possible co-operation between France and Germany? Will the Minister see that we have more medium waves, because we have six against the enemy's 84?

Mr. Cooper: I am doing all I can to increase the number of wave-lengths.

Captain Plugge: But for 10 months this has been demanded, and nothing has been done.

Oral Answers to Questions — ROYAL NAVY.

UNDERGRADUATES (TRAINING).

Mr. Silkin: asked the First Lord of the Admiralty whether he will consider the creation of training corps at the universities, for specialised preliminary training for the benefit of undergraduates desiring to enter the Royal Navy, similar to the Senior Training Corps and the Air Squadrons?

The Parliamentary Secretary to the Admiralty (Sir Victor Warrender): Under the recently announced "Y" Scheme for entry into the Navy, undergraduates may join the Navy, and those who elect to do so are required, pending their calling up for actual naval training, to belong to either the Senior Training Corps or the University Air Squadron. While the training given in these organisations is not specifically naval, it will be of general value to men entering the Navy who must, in any case, undergo disciplinary training, and undergraduates who have volunteered under the "Y" Scheme for service in the Fleet Air Arm will particularly benefit by the training in the University Air Squadron. My right hon. Friend does not consider, therefore, that the establishment of a specifically naval training corps at universities would be justified.

Mr. Silkin: Is the Parliamentary Secretary aware that there is a very strong feeling at all the universities that these facilities ought to be provided and that their absence tends to discourage recruitment to the Navy?

Sir V. Warrender: I am not aware of those facts, but if the hon. Gentleman will put them before me, I will certainly look into them.

Mr. Pickthorn: Has the Parliamentary Secretary or his right hon. Friend consulted Admiral Richmond on this question?

Sir V. Warrender: I should like to have notice of that question.

AIR PROTECTION (SHIPS, GRECIAN WATERS).

Mr. Stokes: asked the First Lord of the Admiralty why steps were not taken to provide for adequate air protection on the island of Crete for ships operating in Grecian waters; and whether he proposes to hold an inquiry into the Naval losses which subsequently took place in consequence of neglect to take the necessary action?

Sir V. Warrender: The first part of the Question, which was answered by my right hon. Friend the Prime Minister during the Debate on 10th June, deals with a matter for which the Admiralty are not responsible. As regards the second part of the Question, my right hon. Friend does not consider that a general inquiry on the lines proposed would serve any useful purpose. As far as Boards of Inquiry into the loss of individual vessels are concerned, I would refer my hon. Friend to the answer which was given to the hon. and gallant Member for Cleveland (Commander Bower) on 30th April.

Mr. Stokes: Do the Admiralty consider that they were justified in taking the risks they did in the absence of adequate protection, and is it proposed to take any disciplinary action against the people responsible for not having adequate protection prepared in the time available?

Sir V. Warrender: I have said that the first part of the hon. Gentleman's Question raises a matter which is not the responsibility of the Admiralty.

Oral Answers to Questions — GREAT BRITAIN AND UNITED STATES.

Mr. De la Beère: asked the Prime Minister whether he can now give an assurance that, as distinct from the idea of an Anglo-American entente, the Government will not formulate a plan for a federal union between this country and America without a mandate from this country?

The Prime Minister (Mr. Churchill): So great a change could not be brought about without the fullest public and Parliamentary discussions beforehand.

Mr. De la Bère: Does my right hon. Friend appreciate that, whereas the whole country wishes to extend entire good will and understanding to the American people, this does not amount to a desire to have federal union now or at any future date?

The Prime Minister: I do not think I have anything to add to my reply.

Oral Answers to Questions — QUESTIONS TO MINISTERS.

Mr. Stokes: asked the Prime Minister whether he will consider arranging for each Defence Minister to give in formation concerning the operational activities of his own branch of the Fighting Services, thereby enabling Supplementary Questions to be put to, and answered by, the Minister immediately concerned?

The Prime Minister: No, Sir.

Mr. Stokes: Has the Prime Minister noticed the increasing practice of the Minister of Defence answering for all three Service Departments, and. does he appreciate that this does not suit the convenience of hon. Members who can only expect to get adequate replies to Supplementary Questions from a Minister who has detailed information at his disposal?

The Prime Minister: No, Sir; 1 do not take that view.

Oral Answers to Questions — EIRE (PORTS AND AIR BASES).

Dr. Little: asked the Prime Minister whether, since attention was given to the protest of Mr. de Valera rather than to the wishes of the Ulster Government on conscription for Northern Ireland, he will

make representations to Mr. de Valera as a quid pro quo to hand over the Eire ports and air bases to Britain for the duration of the war?

The Prime Minister: I do not wish to make any further statement on this subject at the present time.

Dr. Little: Is the Prime Minister aware that before the ports were handed over to Mr. de Valera, he said in the Dail, a short time before, that it would be impossible for Eire, much as she desired —

Mr. Speaker: The Prime Minister has said that he does not want to say anything more about this.

Oral Answers to Questions — AERODROMES (EVACUATION).

Mr. Simmonds: asked the Prime Minister which Department of State is responsible for the destruction of aerodromes in British hands which it might be decided to evacuate in the face of enemy pressure?

The Prime Minister: It would not be in the public interest to give information about the arrangements in the matter to which my hon. Friend refers.

Mr. Simmonds: Can my right hon. Friend assure the House that in view of the lessons of Crete and the fact that the safety of this country might depend on this issue, any liaison between any two Departments which might be involved has been most carefully scrutinised, and that in future any co-operation between those two Departments will be organised on the soundest basis?

The Prime Minister: I did not give my answer without having before me the actual arrangement which is to be enforced.

Oral Answers to Questions — WAR PRODUCTION.

Mr. Granville: asked the Prime Minister whether he will consider the appointment of a Minister for War Production with full powers to carry out a policy for the conscription of our full industrial resources, to include uniform hours, rates of pay and working conditions in factories and the regulation of priorities in materials?

The Prime Minister: No, Sir.

Mr. Granville: Will my right hon. Friend use his great authority to see that not a single hour is lost in war production factories at the present time?

The Prime Minister: I should have enough to do if I were to undertake that.

Oral Answers to Questions — CIVIL DEFENCE (AWARDS FOR GALLANTRY).

Mr. A. Edwards: asked the Prime Minister whether, in view of the difficulty of avoiding invidious distinctions at a time when widespread heroism is being displayed, he will consider the suspension of all such awards as a tribute to the nation for its heroism and devoted service?

The Prime Minister: No, Sir.

Mr. Edwards: Is the Prime Minister aware that there was recently a most undignified squabble between the Lord Provost of Glasgow and certain departmental officials who refused to accept the recommendation of the Lord Provost and others charged with that duty, and would it not be well to avoid these differences?

The Prime Minister: My feeling is that the wide distribution of the George Medal is a most important measure at the present time. Of course some difficulties arise when a great process like this is going forward, but the complaint I have heard made continually is that not enough recommendations are made.

Mr. Buchanan: Is the Prime Minister aware that at the present time, to aid in the war effort, he ought to bring the Lord Provost of Glasgow into the War Cabinet?

Oral Answers to Questions — MINISTRY OF SUPPLY.

FERTILISERS.

Sir. Hannah: asked the Minister of Supply what he is doing to mitigate the hardship to market gardeners in that sulphate of ammonia, superphosphates and sulphate of potash are controlled, pre venting them from mixing these ingredients in the way they find from experience suits their own conditions and forcing them to pay a much higher price for the standard compound, which is not controlled?

The Minister of Supply (Sir Andrew Duncan): No supplies of sulphate of potash are at present being made available either to compound manufacturers or to growers. But potash in the form of muriate, as well as the other two fertilisers, can be bought by growers. This permission is subject, except in the case of sulphate of ammonia, to certain conditions as to use which, however, also apply to compounds. Prices of the compounds, as well as of their principal ingredients, are controlled.

Mr. Hannah: Does my right hon. Friend realise that if small market gardeners could get the ingredients separately, they feel that they could make composts very much more suited to local conditions than the finished products they can buy?

Sir A. Duncan: They can get them separately under the same kind of conditions.

SCRAP METAL.

Mr. Parker: asked the Minister of Supply whether he is aware that there are large supplies of scrap-metal on the property of disused mines, quarries and rail ways in the counties of Carnarvon and Merioneth, particularly in connection with the Beddgelert-Portmadoc Railway; and whether steps are being taken to make use of this?

Sir A. Duncan: Steps are being taken to bring this material into consumption. The material on the railway mentioned has already been requisitioned and is being recovered.

WASTE PAPER COLLECTION.

Sir Irving Albery: asked the Minister of Supply whether he is satisfied that the collection of waste paper is adequate; and that the present licensing arrangements are not impeding its collection?

Sir A. Duncan: Since November, 1939, local authorities have collected and returned to industry 370,000 tons of waste paper. The supply does not, however, equal the demand and further steps are being taken to stimulate increased recovery. The present licensing arrangements, which aim at securing the proper sorting of waste and its diversion to mills best suited to use the various grades, do not impede collection.

Sir Robert Young: Is the Minister aware that much paper is wasted at markets, which are held once or twice a week in different parts of the country, because no receptacles are provided in which to put any waste paper?

Sir A. Duncan: I will take note of that.

Oral Answers to Questions — FOOD SUPPLIES.

FRUIT PRESERVATION.

Mr. Parker: asked the Parliamentary Secretary to the Ministry of Food whether he will arrange for those wishing to make jam with soft fruit any week to give up their half pound of jam and receive an extra half pound of sugar in its place?

The Parliamentary Secretary to the Ministry of Food (Major Lloyd George): The suggestion made by my hon. Friend has already been considered and rejected on account of the administrative difficulties to which it would give rise.

Mrs. Hardie: Seeing that women are to be denied the right to make jam for themselves, will the Minister ensure that the jam provided by the manufacturers is not adulterated such as it is at present? At the present time some of the jams are just sticky messes.

SMALL MARKET GARDENERS (PRODUCE).

Mr. Hannah: asked the Parliamentary Secretary to the Ministry of Food whether he realises the financial loss incurred by small market gardeners in that they are not permitted to retail their produce; and will he consider removing this restriction?

Major Lloyd George: I shall be glad if my hon. Friend will let me have an example of what he refers to.

Mr. De la Bère: Is the Minister aware that in the Vale of Evesham many small market gardeners are suffering very severely, and will he specially look into the troubles in Evesham?

Mr. Hannah: It is the same in Bilston.

CHEESE RATION.

Mr. Gallacher: asked the Parliamentary Secretary to the Ministry of Food whether he has considered a letter from the Thornton branch of the Associated

Society of Locomotive Engineers and Firemen requesting that railway workers be included in those categories which are entitled to additional cheese rations; and whether he is prepared to make any concessions in this regard?

Major Lloyd George: It is not possible at present to grant the special cheese ration to other workers than underground mine workers and agricultural workers, but the matter is being kept under review.

Mr. Messer: Has the Minister considered the position of workers in the agricultural industry who are not actually engaged on farm work, but who, by virtue of their possession of an agricultural workers' insurance card, can get this additional ration?

Major Lloyd George: We are reviewing this scheme at the present moment. As the hon. Member knows, when we first introduced it the original division was rough and ready, and it was admitted that there were inequalities on both sides.

Mr. Evelyn Walkden: Will the review include men who possess agricultural industry insurance cards but whose work is really growing flowers and tending lawns?

Mr. Davidson: Are workers in other heavy industries being considered in this review, and when does the Minister expect the review to be completed?

Major Lloyd George: It is obvious that the supply position is such that we cannot consider a large extension of the scheme. As I have said before, we are guided by the advice of the representatives of industry in any action we take.

Mr. Davidson: When does the Minister expect the review to be completed?

Major Lloyd George: Very shortly.

Mrs. Adamson: Will the Minister consider the case of railwaymen?

Major Lloyd George: I must refer my hon. Friend to my reply to the original Question.

PILCHARDS.

Sir R. Blair: asked the Parliamentary Secretary to the Ministry of Food whether he will arrange, whenever supplies are available, to distribute pilchards to the smaller inland towns in the South of England and to publish directions for preparing pilchards for the table?

Major Lloyd George: I shall be happy to bear my hon. Friend's requests in mind.

Sir William Wayland: Is it not a fact that pilchards are being withdrawn from sale to consumers owing to the very low prices fixed by the Ministry of Food, and that to sell them at the fixed price would mean a loss?

Major Lloyd George: I am not aware of that.

WHEAT (FLOUR EXTRACTION).

Sir Malcolm Robertson: asked the Parliamentary Secretary to the Ministry of Food, seeing that the extraction of flour from wheat has been raised from about 70 per cent. before the war to 75 per cent. to-day, what is the loss of animal feeding-stuffs per week thereby incurred, and the additional loss that would arise for each 1 per cent. increase in the rate of extraction above the present figure?

Major Lloyd George: While it would not be in the public interest to publish figures from which the present production of flour and animal feeding-stuffs might be calculated, I am happy to be able to assure my hon. Friend that there has been no appreciable decline in the supply of home-milled wheat by-products, as compared with the pre-war supplies.

Mr. Loftus: Will the Minister consider the gain to public health in providing the public with nutritious flour, instead of the devitalised product hitherto offered by the great milling concerns?

Major Lloyd George: My hon. Friend is probably aware that a great deal of work has already been done in this regard.

Mr. Stokes: Docs not the Minister think it highly desirable that the monopoly of the milling combines should be broken once and for all?

Commander Locker-Lampson: If a 95per cent. content was given in the last war, why can we not give it in this war?

Major Lloyd George: There are other considerations to be thought of there. The higher the extraction the less we get for feeding-stuffs. I believe that in the last war the content was probably less.

Sir M. Robertson: asked the Parliamentary Secretary to the Ministry of

Food whether he is aware that, if the rate of extraction of flour from wheat were raised to 85 per cent. in order to provide a universal wholemeal loaf, it would increase the amount of flour available by 13⅓Per cent., but the resultant decline in the amount of wheatfeed would be 40 per cent.; and, in view of the substantial reduction in the importation of maize and barley from abroad, what steps he proposes to prevent further reduction in the supply of wheatfeed which must lead to a considerable decrease in the nation's milk and meat supplies and to a heavy slaughtering of livestock?

Major Lloyd George: The percentages quoted by my hon. Friend are substantially correct. As regards the latter part of his Question, the possibility of avoiding a reduction in the supply of home-milled wheat by-products depends, to a considerable extent, upon the availability of shipping.

Mr. Stokes: Does the Minister not think it highly desirable that these vitamins should be fed to the human species direct, instead of through the digestive organs of a cow?

Major Lloyd George: That process is the first consideration.

Mr. Maxton: Has the Minister had any complaints from housewives that the new loaf becomes mouldy within a short period of its arrival in the household?

Major Lloyd George: I have had no complaints, but it is obvious that this loaf will not last quite as long as the other.

Commander Locker-Lampson: Is it not a fact that if you added the other 25 per cent., it would not become mouldy?

Sir M. Robertson: Is the Minister in close touch with the Ministry of Agriculture on this subject?

Major Lloyd George: Yes, Sir.

Commander Locker-Lampson: Will the Minister receive a deputation?

Commander Locker-Lampson: asked the Parliamentary Secretary to the Ministry of Food whether he has made an estimate of the amount of shipping which could be saved if a wholemeal loaf of 95 per cent. content were adopted; what saving in meat and other food products


would ensue; and how many tons of offals would be available for pigs and poultry if all wheat were milled here?

Major Lloyd George: My Noble Friend has estimated the amount of shipping space which could be saved on the transport of grain for bread for various rates of extraction and has considered this in relation to other factors of importance which must be taken into account. In reply to the second part of the Question, as raising the rate of extraction would not be likely to increase the consumption of bread, it is unlikely that any saving in meat and other foods would ensue as a result of altering the rate of extraction of flour. In reply to the third part of the Question, as the flour mills of this country are already milling wheat practically to their full capacity, it is obvious that to raise the rate of extraction to the figure mentioned by my hon. and gallant Friend would result in a substantial reduction of the wheat by-products available for pigs and poultry.

Commander Locker-Lampson: Will the Minister receive a deputation on the subject?

Major Lloyd George: If my hon. and gallant Friend cares to make such an application, I will consider it.

Sir M. Robertson: asked the Parliamentary Secretary to the Ministry of Food what has been the percentage increase in the consumption of wholemeal flour in the 12 months ended 31st March last compared with the preceding 12 months; what percentage the present consumption of wholemeal flour represents of the total consumption of flour in the country; and what percentage of this consumption is being used for purposes other than human food?

Major Lloyd George: I regret that no separate records are available to show the consumption of wholemeal flour in either of the periods mentioned by my hon. Friend. It is estimated, however, that since July, 1940, the consumption of wholemeal and wheatmeal flour has increased and now represents some 3 per cent. of the flour consumption of the country, exclusive of national wheatmeal flour, which has only been produced since the beginning of this year and represents approximately 1½ per cent. of the flour consumption of the country. As regards

the latter part of my hon. Friend's Question, the use of any flour for purposes other than human food is prohibited, except under licence, by the Milled Wheaten Substances (Restriction) Order, 1940. My Department has not licensed the use of any undamaged flour for the feeding of dogs or for any other purpose.

RETAILERS (OVERCHARGING).

Mr. James Hall: asked the Parliamentary Secretary to the Ministry of Food whether he will consider granting powers to local food control committees to cancel the licences of food distributors who are proved guilty of charging more than the controlled price of foodstuffs?

Major Lloyd George: Food control committees have already been given the power to revoke the licence of a retailer in circumstances such as my hon. Friend mentions.

EGG CONTROL SCHEME.

Mr. Simmonds: asked the Parliamentary Secretary to the Ministry of Food whether it is proposed to grant to egg producers with more than one dozen hens the right to draw their domestic requirements from the eggs they produce?

Mr. Davidson: asked the Parliamentary Secretary to the Ministry of Food whether he has reached a decision on the question of marketing of eggs as related to the small producers with less than 50 hens; whether such small producers can only feed their birds by collecting quantities of waste food; and whether he is satisfied that the pooling of eggs in those circumstances will not discourage small producers, reduce the production of eggs, and destroy the valuable utilisation of waste food for nationally useful purposes?

Major Lloyd George: With the permission of the House, I will make a statement on this matter at the end of Questions.

At the end of Questions:

Major Lloyd George: My Noble Friend has decided to bring the distribution of eggs under control. Imported eggs are already under control and it is now proposed to extend the control to eggs produced on commercial holdings in this country. The object of the plan is to secure an increase in the supply of eggs in towns and to defeat the "black


market" which has grown up in home-produced eggs. The problem is one of great complexity and my Noble Friend has modified some of the provisions of the scheme of which particulars have recently been published. Under the scheme which it is proposed to introduce at an early date, commercial egg producers will not be allowed to sell eggs except to a recognised packing station or an authorised buyer. With the help of my right hon. Friends the Minister of Agriculture and the Secretary of State for Scotland, a relationship will be established between the eggs sold by, and the feeding-stuffs coupons issued to, commercial egg producers, with the effect that national supplies of feeding-stuffs will be used to secure eggs for general consumption. Domestic producers will be exempt from these requirements, but will be free to sell eggs through prescribed channels.
There will be nothing in the Order to prevent any producer from retaining eggs for his own consumption. All dealers in eggs will be licensed. Packing stations are already in existence, and in England and Wales and in Northern Ireland are so placed as to be able to collect eggs from all commercial producers. In Scotland, special arrangements will be made in areas where the distance between producers and packing stations or authorised buyers would make it uneconomic to collect supplies. Increased prices will be paid to producers selling eggs under the scheme to authorised buyers or packing stations. These prices will be higher than the permitted retail prices, the difference being made good by Government subsidy. Throughout the preparation of the control scheme my Noble Friend has relied mainly on this excess of producer price over consumer price to attract eggs to the packing station, but has not been able to disclose this feature of the scheme earlier because of the effect which a premature announcement of the increase in producer prices would have had on distribution.

Mr. Simmonds: Is it proposed to retain the position of producer-retailer, and can the hon. and gallant Gentleman assure the House that he does not propose to force the smaller producers if they can retail their eggs to pass them to the packing stations?

Major Lloyd George: What 1 said was that they will sell their eggs through prescribed channels. Those channels are prescribed in the Order.

Mr. Mainwaring: Why has it become necessary to give the producer a price higher than that hitherto ruling for retailers? Will he give some indication why this absurd step is necessary?

Major Lloyd George: We tried to get the producer a price which makes it possible to produce at a profit. It does not matter which way you put it—whether you call it a higher price to the producer or a lower price to the consumer. You must try to get them to produce at a profit, or they will not produce at all.

Mr. E. Walkden: Are some of these packing stations still privately owned and run for profit?

Major Lloyd George: I could not say without notice, but we are getting control of all eggs now.

Sir William Davison: Is a private individual still limited to 12 fowls, and will he be able to get feeding-stuffs?

Major Lloyd George: He is free to sell at the price that anyone else is, and he gets the same price. I referred to the domestic producer as opposed to the commercial. Domestic producers are those who get their rations from the Domestic Poultry Keepers' Council; commercial producers get it through the agricultural executive committees. On the whole the figure is about 50 hens for the domestic producers and about that for the commercial.

Captain Sir Ian Fraser: Will my hon. and gallant Friend say whether the number of prescribed channels through which these eggs may only be sold will be sufficient and sufficiently widespread for the little man to be able to get at them?

Major Lloyd George: Most certainly; we are anxious to get as many eggs as possible at the collection centres from the little man.

Mr. Mathers: Will it be made possible for the poultry which are still alive to be kept alive in order that eggs may be produced from them?

Major Lloyd George: I should hate to think that this organisation did anything to cause the decease of any more hens. This statement ought to relieve their minds of any anxiety.

Mr. Loftus: Will my hon. and gallant Friend see that in future such announcements as he has read out are given first to the House of Commons and not given out in driblets to the Press beforehand?

Major Lloyd George: I think that my hon. Friend is under a misapprehension. The announcements which, as he said, were given in driblets were announcements which it was vital to give out to the trade. In the first instance the scheme was announced to the House, but with a new scheme there is certain machinery that has to be put in order and it is necessary for the people in the trade to know what they have to do.

Mr. Davidson: Will the hon. and gallant Gentleman issue a statement now about the scheme in order to reassure the small man who has 12, 13 or 15 hens, because the language used in Parliament may not make it clear to these people?

Major Lloyd George: Of course I will, but the hon. Gentleman will appreciate that the reply which I gave to a Question will make it clear to the little man.

Mr. De la Bère: Has there not been too much unfinished thought about this scheme?

Captain Cunningham-Reid: In order properly to supervise what happens to the egg as soon as the hen has laid it, does it not mean that very soon we shall have as many inspectors as eggs?

Major Lloyd George: I can assure my hon. and gallant Friend that the laying of the egg is not the most difficult part of this problem.

Sir John Mellor: asked the Parliamentary Secretary to the Ministry of Food why it was necessary for the Ministry to announce, through the British Broadcasting Corporation, on 14th June, that the scheme for the distribution of eggs had not been abandoned; and whether the Minister is prepared to revise the scheme in the light of subsequent criticism?

Major Lloyd George: The broadcast announcement was necessitated by the

appearance in certain papers of an entirely unauthorised statement that the scheme had been cancelled. This statement appeared on the last day upon which consumers were asked to register with retailers. The purpose of the broadcast was to inform the public that registration was still necessary.

Sir J. Mellor: Were the representatives of the producers and distributors consulted before the scheme was published?

Major Lloyd George: Certainly.

CANNED JAM (IMPORTS).

Sir W. Davison: asked the Parliamentary Secretary to the Ministry of Food whether further consideration will be given to the proposed placing of a ban on the importation of jam from Australia and South Africa, seeing that this is a finished product, usually sent in tins, in which the jam can be kept for a long period, thereby saving the importation of sugar and fruit from abroad and the utilisation of labour in this country, which is much needed for war purposes, both in the making of the jam itself and in the jars to contain the same?

Major Lloyd George: The question of future imports of canned jam from the sources mentioned by my hon. Friend is at present under consideration.

Sir W. Davison: Will my hon. and gallant Friend bear in mind the probable shortage of fruits in this country, and the great desirability of getting these supplies from Australia and South Africa which would give, the additional benefit referred to in the Question, namely, saving labour and sugar in this country?

Major Lloyd George: Certainly. My hon. Friend will realise that very substantial imports have been coming from Australia this year.

Oral Answers to Questions — COAL SUPPLIES, NORTHERN IRELAND.

Dr. Little: asked the Secretary for Mines whether, owing to the present shortage of coal in Ulster, he will arrange during the summer months to have a greatly increased quantity of coal shipped to Northern Ireland in order that the increased demand for winter consumption may be met; and whether he will arrange,


so far as possible, that coal of a better quality be supplied?

The Secretary for Mines (Mr. David Grenfell): The House is well aware of the importance which the Government attach to stocking coal during the summer against the needs of next winter, and in estimating the country's requirements For this purpose the needs of Northern Ireland were taken into account, the Northern Ireland Government being consulted. The fulfilment of these needs, as of those of the rest of the United Kingdom depends upon the result of the measures being taken to secure the necessary production from the mines.

Mr. G. Griffiths: Is the hon. Gentleman aware that there are certain miners in the Army who are not doing military work but pecking up fats, and will he see that they are liberated to get some coal?

Mr. Grenfell: I do not know what they are doing in the Army.

Dr. Little: Could the hon. Gentleman send a representative to Northern Ireland to inquire into the situation created by the shortage of coal?

Mr. Mainwaring: Why, in this great emergency, are steps being taken to take still more men from the mines?

Oral Answers to Questions — POOR PERSONS, SCOTLAND (RELATIVES' LIABILITY).

Mr. Mathers: asked the Secretary of State for Scotland which are the relatives considered liable to maintain a poor person under the Poor Law Acts; whether it is the practice for all local authorities to recover cost of maintenance from liable relatives able to meet that cost; and on what basis ability to meet the cost is determined?

The Under-Secretary of State for Scotland (Mr. Westwood): The liability of maintaining a poor person in Scotland under Common Law is briefly as follows: Husband for his wife and children; wife with separate estate for her indigent husband, children, grandchildren, parents and grandparents. With regard to the second part of the Question, my right hon. Friend is unable to say whether all the local authorities take steps to recover the cost of maintenance in such cases. With

regard to the last part of the Question, relatives are liable only where their means are in excess of their needs. The final determination rests with the courts.

Mr. Mathers: Will the Scottish Office take into account the desirability of uniformity in respect of the amount of relief and uniformity of administration?

Mr. Westwood: The question of the amount of relief is left to the local authorities. The final determination, as to its justice, rests with the courts.

Mr. Buchanan: Is it not desirable that local authorities should bring themselves into line with what has been done by Parliament?

Mr. Westwood: Expressing my own personal view, I should say that is the right thing for local authorities to do.

Oral Answers to Questions — VOTE OF CREDIT (SUPPLEMENTARY), 1941 (EXPENDITURE ARISING OUT OF THE WAR).

Estimate presented of the further sum required to be voted towards defraying the expenses which may be incurred during the year ending 31st March, 1942, for general Navy, Army and Air Services, and for the Ministry of Supply, in so far as specific provision is not made therefor by Parliament, for securing the public safety, the defence of the realm, the maintenance of public order and the efficient prosecution of the war, for maintaining supplies and services essential to the life of the community and generally for all expenses, beyond those provided for in the ordinary grants of Parliament, arising out of the existence of a state of war [by Command]; referred to the Committee of Supply, and to be printed. [No.96.]

MESSAGE FROM THE LORDS.

That they have passed a Bill, intituled, "An Act to remove doubts as to, and to supplement, the powers of trustees in relation to insurance against war damage." [Trustee (War Damage Insurance) Bill [Lords.]

Also a Bill, intituled "An Act to provide for the trial of certain offences against the Naval Discipline Act by disciplinary courts instead of by courts-martial." [Naval Discipline (Amendment) Bill [Lords.]

And also a Bill, intituled," An Act to empower the Urban District Council of Ebbw Vale to construct new waterworks; to confer further powers on the Council in regard to their water undertaking; and for other purposes." [Ebbw Vale Urban District Council Bill [Lords.]

EBBW VALE URBAN DISTRICT COUNCIL BILL [Lords].

Read the First time, and referred to the Examiners of Petitions for Private Bills.

Orders of the Day — WAYS AND MEANS [17th June.]

Resolution reported,

INCOME TAX— TAX-FREE PAYMENTS, ETC.

That provision shall be made for modifying—

(a) obligations to pay sums free of Income Tax or free of Income Tax other than Surtax or sums so calculated as to leave a specified amount after deduction of Income Tax;
(b) obligations to pay sums in respect of the Income Tax of another person."

Resolution agreed to. Ordered,
That it be an Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolution.

Orders of the Day — FINANCE BILL.

Considered in Committee. [Progress, 17th June.]

[Colonel CLIFTON BROWN in the Chair.]

NEW CLAUSE.—(Modification of provisions for tax-free annuities, etc.)

(1) Subject to the provisions of this section, any provision, however worded, for the payment, whether periodically or otherwise, of a stated amount free of income tax, or free of income tax other than surtax, being a pro vision which —

(a) is contained in any deed or other instrument, in any will or codicil, in any order of any court, or in any contract, whether oral or in writing; and
(b) was made before the third day of September 1939; and
(c) has not been varied on or after that date, 
shall as respects payments falling to be made during any year of assessment, the standard rate of income tax for which is ten shillings in the pound, have effect as if for the stated amount there were substituted an amount equal to twenty twenty-ninths thereof.

(2) Where any such provision as is mentioned in subsection (1) of this section is a provision for a payment free of income tax (and not merely a provision for a payment free of income tax other than surtax) the sum, if any, to be paid under that provision to make good the requirement that the payment shall be free of surtax shall, in the case of surtax for the year preceding any such year of assessment as is mentioned in the said sub section (1), be reduced to twenty twenty-ninths of the sum which would have been sufficient for that purpose if the rates of surtax in force for the year 1937–38 had applied to the year for which the surtax is payable.

(3) A person who is entitled under any such provision as is mentioned in subsection (1) of this section to a payment free of income tax, or free of income tax other than surtax, shall be entitled to the following adjustment of his surtax for the year 1940–41, that is to say, his total income for that year, so far as it is ascribable to his rights under that provision, shall be reduced to what it would have been if in his case—
(a) the rates of surtax in force for the year 1937–38 had applied also to the years 1938–39, 1939–40 and 1940–41; and
(b) the 1938–39 rates of income tax other than surtax had applied also to the years 1939–40 and 1940–41; and
(c) the rights and liabilities of the persons concerned had been modified accordingly.

(4) If, in the case of a payment to which subsection (1) of this section applies the relations of the payee and payor are such that the payee is accountable to the payor for so much of any relief from income tax which he receives as is ascribable to the payment, —
(a) the liability of the payee to account to the payor shall be limited to twenty twenty-ninths of the sum for which he would have been accountable if the 1938–39 rates of income tax, other than surtax, had applied to the year of assessment in which the payment falls to be made and the foregoing provisions of this section had not passed; and
(b) the relief to be given shall be calculated as it—
(i) the gross sum represented by the payment were what it would have been if the 1938–39 rates of income tax, other than surtax, had applied to the year of assessment in which the payment falls to be made, and the foregoing provisions of this section had not passed; and
(ii) that gross sum had borne income tax at ten shillings in the pound.

(5) This section shall not—
(a) affect any provision falling within Rule 23 of the General Rules (which renders in valid agreements not to deduct tax);
(b) affect any provision if, by virtue of any provision in the same or any other deed, instrument, will, codicil, order or contract, which contemplates rises in the rates of in come tax, the payments thereunder have ceased, or, in the event of further rises in the rates of income tax, may cease, to be wholly free of income tax, or, as the case may be, wholly free of income tax other than surtax;
(c) apply to any emoluments of any office, employment, annuity, pension or stipend taxed under Schedule E; or
(d) apply to any dividends or shares of profits. — [Sir K. Wood.]

Brought up, and read the First time.

The Chancellor of the Exchequer (Sir Kingsley Wood): I beg to move, "That the Clause be read a Second time."
In moving this new Clause, I would like to make one or two additional observa-


tions, particularly in view of the discussion which took place yesterday and of the proposals which I see on the Order Paper to-day from some of my hon. Friends. I will then indicate my general position on this matter. I am proposing the new Clauses which appear on the Paper in order to deal with what I think was generally regarded in the Committee as an obvious inequity which arises from the present high taxation. That, of course, apart from the general question, is of importance to the Treasury, and I would emphasise that these proposals have been made because of the tremendous increase in taxation and the necessary adjustment that is required. It is true that I have excluded from these proposals preference shares, to take one example, which were the subject of discussion yesterday. I would emphasise the reason why I made that exception, which I am glad to see from various quarters to-day has received a considerable amount of approval, and I will only briefly sum it up to-day.
I differentiate, as I think a good many people do, between the position of a person who makes a contract with another individual, such as is covered by the new Clause, and the position which would arise if I endeavoured to deal with the rights of individuals in shares which affect many thousands of investors. There are a considerable number of people interested in preference shares, and all I have endeavoured to do in these proposals is to remedy the inequality and injustice which were generally recognised in the present position. I should, however, be doing an unsatisfactory thing if in order to remedy an inequality or injustice of that kind I created a good many more. That is the position which is emphasised in certain portions of the Press to-day, and that is one of the justifications for the differentiation I have made. It is, in fact, the position that a considerable number of investors have in good faith invested in shares of this character or have disposed of shares without having regard to any possibilities that would follow and -such as have been envisaged in the Clauses on the Paper. It is quite normal for companies to advertise for subscribers to this class of share on the basis that they are to be free of tax. I would like my hon. Friends who have raised this matter to have regard to this fact, that I differentiate, on that account and because of the reasons which I have

already given, between the position of a person who is affected under a will or a contract and the position of those who might be adversely affected in the way I have suggested if these proposals were applied to them. In other words, the differentiation which I have made has been made for practical reasons and on the grounds which I have ventured to indicate to the Committee.
There is another aspect of the matter which the Committee must not overlook. If any proposals such as are contained in this Clause affected preference shareholders, it would make a difference in the values as between buyer and seller and also a difference as far as the value of ordinary and preference shares is concerned. I see, for instance, this morning in the financial columns of the "Times," which so many people read, that they quote what I stated with regard to preference shares:
To bring them within the scope of the resolution would be to penalise people who had made investments or dispossessed themselves of investments ' without any knowledge or expectation of legislative action calculated to undermine the whole basis of their transactions.' 
It is added that that is a sound reason. In order that I shall not unduly advertise one newspaper over another, I turn to a paper of very different political opinions, which I, personally, read every day, namely, the "Manchester Guardian". They take the same view. They do not adopt the reason which I have given, but they say this:
Surely the reason for leaving free-of-tax dividends alone is an altogether more fundamental one, namely, the undesirability of varying legal contractual obligations, except in cases of great hardship.
Therefore, I think there is, in fact, as I hope my hon. Friends who are interested in this matter will realise, a very considerable case for my proposal. It is for that reason and on practical grounds and in order that I may not in remedying one injustice create more injustices, that I have made this differentiation.
I turn now to the question which was raised, whether at this moment, when I am taking this very considerable step, I should not, as suggested in one Amendment, make a general prohibition of these agreements for the future. I wish to say a few words upon that obviously very


important aspect of the matter. Such a step as that could be taken only after very close consideration of the position and, as far as I am concerned, after consultaton with my colleagues who may be concerned. I wish to express not only my own opinion on the matter, but the views of a number of people who have made representations to me. I daresay that many of my hon. Friends have had opinions of the same kind expressed to them. Is it right that Parliament should prohibit altogether these tax-free provisions, either in contracts or wills or in any other form? Opinions vary a great deal on that point. Some of my hon. Friends yesterday seemed rather to indicate, judging from the short study I have been able to make of their speeches since, that it was morally wrong, or at any rate against the public interest, that such provision should be permitted. Again, let me say that I am not expressing my own view on the matter, but there is, of course, a considerable case to be made against a proposal of that kind. You cannot say that tax-free provisions are morally wrong.

Sir Irving Albery: I think if the right hon. Gentleman reads the speeches again, he will find that none of us suggested that it was morally wrong. We did suggest that it was against the public interest.

Sir K. Wood: Very well then, I will confine myself to that point. I admit that I have not yet had time to read through the speeches carefully. But the question arises: Are these provisions against the public interest and therefore, in that respect detrimental? It is argued that they are, but, on the other hand, a strong case can undoubtedly be presented against that assumption. The argument could be used, though I do not use it myself, that we issue Savings Certificates, for instance, free of tax. There may be various reasons why exception should be given on that account. But take the case of a man who wants to be absolutely sure that proper provision has been made for his wife. There must be thousands of people in this country at this time who are in that position. I think many of us know exactly what that means. To many of us, I am sure, the greatest interest that we have at this moment is

to secure, as far as is humanly possible, that our wives are suitably provided for against all eventualities. Each one of us is anxious to make such provision as he can for his wife and, if possible, protect her against the effects of any alterations which may be made in respect of Income Tax, Sur-tax or other taxes of that kind.
That applies to a very large number of people in this country, and I will endorse the argument on that ground to this extent, that I am sure a very large number of people would resent very much the proposition that it was against the national interest to make such provision for one's wife and that it should be prohibited by Parliament. If I may put it in a personal way, just to bring it home more vividly to the Committee, suppose I say, "I will leave my wife a certain annuity free of tax so that when my time comes, I shall feel sure that, as far as was humanly possible, I have made provisions for her to live in the condition in which I should like her to live without liability to any further increase of taxation and so that, if such taxation has to be paid, it should be paid by other people who are not as near and dear to me as she is. "That is a very strong case indeed against a general prohibition.
There is another point which I should like the Committee to consider, because this is a subject to which careful consideration must be given; it cannot be decided in a moment. We should not make a law which can be easily avoided and so treated as to hold up to ridicule Parliament and the Legislature. The Solicitor-General can add to these observations if necessary, because he can speak with the highest authority as one of the leading lawyers of to-day, but I do not think he would dispute with me when I say that if we absolutely prohibited the making of payments free of tax, such a provision would be easily avoided. If I so desired, still keeping within the terms of the proposal put down by my right hon. Friend opposite, I could, when leaving an annuity of £200 a year to my wife in my will, add the provision that my trustees should have power, in their discretion, to give a further sum of £50 a year if Income Tax were increased by any particular amount. I could go even further and say to my trustees, "It shall be your duty, if you think that with the increase in Income Tax her position will


be seriously affected, to add such further sums as you in your discretion think fit."
Therefore, I say again, we should not enter lightly into a proposal of this kind without seeing where it is we are going. We must not put on the Statute Book proposals which can be easily avoided, and quite properly avoided; there is no moral reason why they should not be avoided. I myself see nothing wrong in a man endeavouring to provide fully for his wife against all eventualities which may arise. As another alternative, as a testator I could say, "I will not bother about the amount I leave my wife. I will direct that she should be provided with an annuity to enable her to maintain a particular house, irrespective of her income. "I can say that my trustees must maintain her in that house, must maintain a car for her, must maintain a chauffeur for her. I could go through a long range of things which I might desire to secure to my wife, and then end up by saying, "I give discretionary power to my trustees to add such further sums as they may think desirable in order that she may be maintained as I should desire her to be maintained, and for which I have worked all my life." Therefore, these proposals would be most difficult to enforce. We must be careful before we embark on that line of country.
But let us look at the proposal which the right hon. Gentleman has put down —I have no doubt for the purposes of discussion. One effect of it would be that after to-day all transactions which were directed to making payments free of tax would be void. Where would that lead us? Under my proposals, and so far as pre-war contracts and arrangements are concerned, the Income Tax would be adjusted, so that Income Tax over the 5s. 6d. in the pound would be paid by the recipient and the other portion as set out in my Clause. My right hon. Friend's proposal does not deal in any way with all those arrangements free of tax which have been made from the beginning of the war until now, and all those people would be able to continue as now receiving payments free of tax. Finally, we should end up with the position that after to-day, there would be full and complete prohibition.
I wonder what would happen throughout the country if we did insert a complete

prohibition against all payments free of tax. At this moment we have thousands of soldiers, sailors and airmen oversea. They have very full facilities for making wills. They are not subject to all the conditions and restrictions which apply here. They can make a will very easily indeed. If one of them made a will to-morrow— they would not have read the OFFICIAL REPORT, and the decision of this House would not have reached them—leaving his wife £100 a year free of Income Tax, that bequest would be wholly void. If the unfortunate man were killed the day after, he would have made a will in which no legal provision had been made for his wife. We could not contemplate that state of affairs, and if there were to be a prohibition of this kind, there would have to be many exceptions and conditions. In addition, there would probably be numerous cases in this country in which, through inadvertence or some slip, wills were made containing similar provisions about tax-free payments to wives, and there could be no adjustment such as is provided for in my proposal but the whole bequest would be absolutely void. That is not a matter which any of us would like to contemplate.
What I do feel a good deal of sympathy for is the point of view of those who cite the case of directors who are paid as remuneration large amounts free of tax. I do not want to speak too strongly in condemnation of it, but I think it is an almost impossible position to-day, when to ensure that a man shall receive £3,000 or £4,000 a year free of tax involves a company in very heavy outlay. I do not think that is a situation which can be regarded with favour. I feel that when shareholders are called upon to sanction these payments free of tax all the cards should be on the table. It might be the subject of a statutory condition, though that is a matter on which the President of the Board of Trade would have something to say. It could be a statutory condition that, either in the report or in the proceedings before shareholders, shareholders should know exactly what a proposal of this kind means to them. It is true that if the shareholders want to give very large sums to directors, they can avoid the free-of-tax provision by voting the full amount. Well, let them vote the full amount. In that connection I feel there is a very considerable case indeed.
I hope I have not put this matter too strongly or argumentatively to the Committee, but I wanted hon. Members to see the danger of any immediate decision on the matter. I have expressed these views in regard to the objections made to the proposal which was put forward yesterday. Having taken the forward step represented by those proposals, I ought to see, in conjunction with my colleagues, whether any further steps can properly and legitimately be taken. The Committee having listened to me so patiently, I would ask hon. Members to leave the matter with me in this way. I would say, in conclusion, only this: Merely because some would like to go further, let us not think that we have not taken a very considerable step to-day, when we have passed this Clause. At the time when I first entered this House, which is a good many years ago now, many people would have been simply horrified at the Government's making a proposal interfering with the sanctity of contract as this proposal does, and still more those people belonging to the party to which I have the honour and privilege of belonging. I contend that the Clause, drastic in many respects as it is, is warranted by the conditions of the time, and that it lays down in an equitable and fair manner the proper adjustments to be made in the conditions and on the basis of taxation to-day.

Mr. Pethick-Lawrence: On a point of Order. I would ask you, Colonel Cilfton Brown, how you propose to conduct this discussion? I understand that we are now discussing the Question, "That the Clause be read a Second time." The Chancellor of the Exchequer devoted a good deal of his attention—I am not making the smallest complaint about what was an exceedingly interesting speech—to the Amendment which I have upon the Paper and which, strictly speaking, should come up for discussion later, after we have read the Clause a Second time. Naturally you would not wish us to have any discussion twice over, and I would like to know what you would advise. The hon. Member for Gravesend (Sir I. Albery) has also some Amendments on the Paper. Would it be desirable to deal with the whole matter now on the Second Reading, or would it be better to let the Second

Reading go through and then to put the Amendments as they are on the Order Paper?

Sir K. Wood: Perhaps I might add a word on this point of Order. All these things are so intermixed that I was hoping it would be for the convenience of the Committee if we had a general discussion, if you would permit it, including the matters to which the right hon. Gentleman has referred, and so discussed the matter as a whole. It is so difficult to discuss these matters apart. I suggest that a general discussion might be the best course.

The Deputy-Chairman: There are Amendments on the Paper, as has been pointed out, but I am prepared to assent to anything which the Committee wishes. The Amendments are on the Paper, and will have to be called.

Sir I. Albery: I am quite in agreement that the Committee should have a general discussion, either on the Second Reading or upon the first Amendment, provided that subsequent Amendments are safeguarded and can be put without any detailed discussion.

The Deputy-Chairman: If the Committee agree, we can have a general discussion, and I will subsequently put the Amendments so that they may be negatived; but it must be understood that there must be no prolonged discussion. Is that what the hon. Gentleman has suggested?

Sir I. Albery: I take it that there would be no general discussion, but one could say such few words as might be necessary, if they were still necessary, to explain the purpose of the particular Amendment.

The Deputy-Chairman: The Committee would probably assent to that. It must be understood that the speeches must consist of only a few words. Does the right hon. Gentleman agree?

Mr. Pethick-Lawrence: Yes, I agree with that course. In the very interesting speech made by him, the Chancellor of the Exchequer dealt at very considerable length with the Amendment which I intended to move, and he devoted most of his attention to the question of the bequest. He has pointed out that men do,


quite naturally, desire to leave to their wives certain sums to make sure that the standard of living of the wife shall be maintained. He pointed out a flaw in my Amendment which I had not realised, namely, that if the Amendment were carried, not only would any wills or contracts in which provision were inserted to leave certain sums free of Income Tax, be at once affected, and the particular provision be rendered null and void, but the whole bequest would be rendered void. That was a slip of drafting. The Chancellor of the Exchequer will realise that my Amendment was put down in a great hurry. My intention was not that, of course. I did not suppose that the words I used would be embodied in the final form of the Clause. The Committee was greatly interested yesterday in the statement that I made, and I confess it was rather a surprise to find that hon. Members agreed with the view that I took that these arrangements were, generally speaking, undesirable.
I certainly should not wish to divide the Committee against the Government on a matter of this kind. Plainly, the Government must consent of its own good will in connection with the carrying of such a proposal. There are one or two answers I would make to what the Chancellor of the Exchequer has said. The matter of wills is only one part of the subject. The Chancellor himself mentioned another, that of directors' fees. He is quite well aware that even those two do not exhaust the whole field. There are questions of mortgages and other contracts made with the tax-free provision, and it was in regard to the generality of them that my Amendment proposed to deal. It is clear that my Amendment ought to be worded so that it covered the Income Tax-free provision and did not strike out the whole of the provision made by the legacy, contract or whatever it might be.
The right hon. Gentleman the Chancellor of the Exchequer says that it is unthinkable that we should take this step, in regard to wives. I venture to disagree with him even on that issue. It is open to a husband to make provision for his wife, allowing for a reasonable amount of Income Tax such as is likely to prevail during the years that follow. If we were to carry some such proposals as those suggested by myself, it would be quite open to a testator to propose a legacy of £300

or whatever he might think suitable instead of a legacy of £200. When we are dealing with a comparatively small sum of that kind, I see no difficulty in adding 50 or 60 per cent, to the bequest in order to cover the probable amount of Income Tax. But if it is a question of a sum running into thousands, which is to be subject to Sur-tax, then I do maintain, as I said yesterday, that it is contrary to public policy, and an attempt to thwart the intention of this House, if legatees are to be put outside the scope of Income Tax and Sur-tax provisions which this House sees fit to impose. We have been told that it requires an income of £66,000 a year in order to produce a net income, free of Income Tax and Surtax, of £5,000 a year, and I think it requires an income of over £200,000 to produce a tax-free income of £10,000.
It is very undesirable that a testator should seek to place any one of his legatees in a position which frees him from the consequences of the decisions of this House with regard to Income Tax and Sur-tax, and although I do not wish to prevent testators leaving their widows in a condition of affluence, I do not think it is desirable that in their wills they should put them outside the reach of this House, so that they cannot be dealt with in the way that applies to other people. When provision has been made for a widow in a will and this House comes to consider the imposition of a changed rate of Income Tax and Sur-tax, I think it is for this House to consider whether or not any exception should be made. As Income Tax and Sur-tax increase, I believe that the House will insist upon a much more detailed provision in regard to exemptions and allowances. Therefore, even in this special case of a widow, I do not see the great objection which the Chancellor of the Exchequer has raised, though, of course, I understand the point he is making, and if in consequence of any such position arising a widow's share were to be cut down to nothing or to a very small amount, I cannot see that there could be any objection to his proposed course of action.
In the matter of directors' fees, which the Chancellor himself said is a very important one, it is most undesirable that company directors should be able to vote themselves—or persuade the shareholders to vote, if they have to go before the shareholders—sums which appear to be


very moderate in amount, say, £2,000 or £3,000, but which according to the particular circumstances of the director in question may involve the company in sums running to over £100,000. That is an absurd position. I also think it is very undesirable that persons who are taking out a mortgage on some of their property should be pushed into a position involving them in arrangements which cost them a great deal more than the sum which they had in mind to pay, and it is for these reasons, in spite of what the Chancellor of the Exchequer had said, that I thought it would be desirable for the Government to carry a proposal prohibiting action of this kind in the future. After all, as I pointed out yesterday, it would not be unique. Already, in regard to landlords and tenants, we prohibit the landlord of any property from passing the burden of Schedule A Income Tax on to the tenant; I do not know the precise wording of the arrangement which makes that impossible, but at any rate it is effective in preventing any landlord from passing that burden on to the tenant, either directly or by implication, and I see no reason why what applies to landlord and tenant under Schedule A should not apply to other persons.
There was another point the Chancellor made to the effect that people would be put in three categories, the pre-war category, the category from 3rd September, 1939, to to-day, and hereafter. I think that is to some extent a necessary result of the method the Government are proposing though I do not blame them, for I think they have done exceedingly well to produce this legislation at all. There are ways of meeting that, and I think the cleanest and simplest was the way I put forward in the form of an Amendment, excluding all such arrangements made on or after to-day. I doubt whether people are now making wills with tax-free provisions, and I think the general concensus of opinion inside the Committee is in favour of some such proposal. I do not think the Government have any a priori objection to anything of this kind, and I suggest that if the Government cannot see fit to accept my Amendment at the present time, they should think the matter out and, at the earliest convenient opportunity, embody in some Statute or in some Amendment to this

Finance Bill a provision carrying out what I had hoped would be enacted by way of the Amendment I have put down.

Mr. Graham White: From such consideration as I have been able to give this matter, and from the speeches I have had the advantage of hearing, I am led to the conclusion that the Chancellor's proposals in this matter are the best practical ones in the circumstances. At the same time, I think it would be very well indeed if the Government would take the earliest possible opportunity of seeing that we do not build up a further set of entanglements and difficulties in the future by taking action on the lines suggested by my right hon. Friend above the Gangway, or some other means for putting an end to this practice. I think it is, generally speaking, a sound principle that no citizen should be exempted from the full responsibilities of taxation, and I also take the view that the responsibility in the minds of the community for policy which leads to taxation would be very much lessened if people were sheltered from the full consequences of legislative acts. The Chancellor of the Exchequer said that he hoped he had not put the matter too strongly before the Committee. I do not think he did. I think he sought to be impartial, and I gathered that he had no particular views on the subject himself. He had not had time to reconsider some of the objections raised in speeches made yesterday in the House, but he had had the advantage of reading the "Manchester Guardian "—a course of action of which I strongly approve—and also, I gather, the "Times," and so he had been impartial.

Sir I. Albery: Does the hon. Member think it better for Ministers to fortify their opinions rather by reading the daily Press than by reading the speeches made in Parliament?

Mr. White: My hon. Friend the Member for Gravesend (Sir I. Albery) intervenes with a more direct approach than I should have ventured to make myself to a subject which I regard as of some little delicacy. But, as I was saying, the Chancellor has put this matter impartially to the Committee, and explained the sources of his information and his views. I think the conclusion to which he has come is the right one, but I do not


regard the matter as being settled. There is one point as to one section of these transactions, to which the Chancellor has referred, which I think does present an insuperable difficulty—and that is with regard to tax-free securities. There has been for years a large number of transactions with which he was dealing in relation to tax-free securities, in which persons in perfectly good faith had spent considerable sums of money in order to acquire a certain income. I do not see—I do not pretend to be an authority on these matters—any way of dealing with that situation equitably. I think probably the best we can do, having regard to the insuperable difficulties of dealing with that kind of transaction, is to act in future on the lines suggested by my right hon. Friend.

Sir Irving Albery: When my right hon. Friend the Chancellor of the Exchequer made his speech in moving this Clause, he did so in his most persuasive manner. He took, if he will forgive me, a rather wide field, but I do not think he dealt very much with the basic principles which have more or less compelled him to bring this legislation before this Committee. I was a little surprised at the remarks he made concerning evasion. We in this House have had a good deal to do with evasion lately. I have no doubt that my right hon. and learned Friend the Solicitor-General can show him how this tax and many other taxes can be evaded. I have also little doubt, as the result of recent experience, that the Solicitor-General can equally show him how to prevent the evasion. My right hon. Friend has, in this Finance Bill, in some Clauses, measures to deal with evasion which, much as all of us wish to prevent evasion, we may, nevertheless, have to criticise upon other grounds. As regards the position of widows, after all, a widow will not be any worse off than a widow who is benefiting by a will which was made previous to the war. Secondly, there is nothing to prevent anybody, at any time, instead of leaving a certain amount of money free of tax, leaving a larger amount of money.
I want to come back, if I may, to the main reason why this Resolution is introduced. It is because of the very high and unexpected level to which direct taxation has risen, which has caused a set of circumstances which were never at any time

foreseen or contemplated by people who made wills and various other agreements and documents. The Chancellor of the Exchequer has been seized with the necessity of doing something to alleviate that position. Having decided to do it, he came to this House on these lines; he said, "I cannot wipe out altogether tax-free contracts, but I am going "—and I think it was a very sensible view to take —"to draw a line at what is additional post-war taxation and what was pre-war taxation, and I am going to let these contracts remain in force so far as they were affected by pre-war taxation, but I am going to make an alteration as regards additional post-war taxation." That view is accepted by the whole of the House and the whole of the country as a just and wise decision in all the circumstances. That is the basis of the present proposal.
Nearly the whole of the speech by the Chancellor of the Exchequer dealt with the exceptions that he proposed to make to the basic proposal, and the question really before the Committee is not whether the whole proposition is a good one or not—I think we have already agreed on that. The real question is whether it is necessary, after having arrived at that decision, which the Committee and the House think is just and equitable, to make exceptions. The Chancellor of the Exchequer seemed to me to put those who are against the exceptions in a wrong position. I really do not think it is for those who oppose the exceptions to make the case. It is for the Chancellor to make the case for the exceptions. If you have a basic principle and you are to make exceptions, you must justify them. The two principal exceptions the Chancellor proposes to make are first, that he says that contracts made since the outbreak of war should be excepted, presumably because the persons concerned, when they made them, knew of the high rate to which direct taxation was already being lifted, and therefore made the arrangement with their eyes open. Personally, I do not consider that a sufficient reason for altering the basic proposal. I do not see that they will suffer any hardship. They were aware that an exceptional situation existed, and in the knowledge of that—as no amending legislation had been passed they did what was quite right —they made a contract on the existing


basis. The existing basis is going to be changed. To make the exception is going to be very untidy. It is far better to stick to the basis which has been adopted. We have quite enough complications. Why add a lot more? Why have, in future, a category of wills and documents of those before the war, those during the war, and I suppose, those after the war? I cannot see that there is any real hardship to those who made contracts after the war began if those are amended like those made before the war.
The other exception the Chancellor wishes to make is with reference to preference shares. There again I do not think his argument is very strong. Personally, I do not think it is good enough to make the exception, and I do not see the need for making it. The principal arguments the Chancellor put forward were, firstly, that transactions had taken place in preference and ordinary shares, and that those transactions, and the prices fixed, have been governed by the tax-free conditions appertaining to them. I have not had the time to get the figures. I had hoped to show the Chancellor that as a matter of fact these securities which are free of this very high level of taxation give a bigger net yield than other securities not free of tax because it has been in people's minds that something like this might happen. Further, from the point of view of equity—of everybody bearing his proportion of the war burden—the ordinary shareholder is entitled to some consideration. The ordinary shareholders, when their shares were subscribed for originally, had not contemplated any more than did the person who made a will, that Income Tax would rise to 1os. in the £. There again, on grounds of reasonableness, and certainly on grounds of tidiness, it is desirable that this exception should not be made. I have one last argument, which is perhaps the most important argument, against it. I am convinced, and I am sure this House is convinced, that these tax-free contracts serve no good purpose, and that they should be done away with. The Chancellor of the Exchequer said that Members of my party are the last people he expected to see taking up this attitude. Quite frankly, I do not judge these things

from a party point of view, but from a practical point of view.
If Income Tax had remained at its old level, I should not have made any great song about it, although I should still maintain that it was against the public interest to make certain payments tax-free. I think it is against the public interest to pay salaries which are tax-free. All too little attention is paid in this House in peace-time to the question of finance. It seems important that people should be concerned about taxation, and that when they go to the poll to elect Members of this House they should take into consideration questions of finance in connection with the expensive improvements which they hopes to secure but which they do not always have to pay for. I certainly agree that tax-free directors' fees ought not to be allowed to continue. I believe—and the Attorney-General will correct me if I am wrong—that at present the remuneration of directors must be disclosed to the shareholders, but people seem to be too little aware that the remuneration of managing directors in many cases is not disclosed, and that there is no obligation under the 1929 Act to disclose it. Therefore, many companies are paying large sums in remuneration to managing directors about which the shareholders know nothing, and about which they have not the right to require information. That is a matter which calls for legislation in the near future. I do not share the view that it would be wrong to divide against the Government on a question of this kind in Committee. On the contrary, I think that on many occasions it may be right to divide against the Government in Committee. It is well to let the Government see our views in that way. But I do not think that that is likely to arise here. I appreciate what the right hon. Gentleman is doing, and I still have a faint hope that, on further reflection, he will come round to the view that it is far tidier to wipe out these exceptions.

Sir John Mellor: My right hon. Friend the Chancellor of the Exchequer distinguished tax-free dividends on preference shares from other sources of tax-free income on the ground of the marketability of the source of that income. It is true that the shares of some public companies are to some extent, even in these days, marketable in a relatively free market, but that could not be said of the


shares of private companies. It is true that the shares of private companies change hands, but I do not think that they can be said to be marketable, any more than it can be said that there is a free market in such things as annuities and reversionary interests. These are, of course, bought and sold—I believe they are bought and sold at auction—and are in-vested in by insurance companies and others; but one would not say that they are marketable in the sense of being able to find a free market. The same applies to the shares of private companies. I do not: think that my right hon. Friend could really contend that the shares of private companies come within his description of being marketable, as do, to a very large extent, those of public companies. If that is correct, and if the ground of marketability upon which the Chancellor of the Exchequer distinguished tax-free preference shares is to apply, surely it ought to be confined to shares of public companies. 1 ask my right hon. Friend whether, in the event of his being unable to accept the Amendment standing in the name of my hon. Friend the Member for Gravesend (Sir I. Albery), he is prepared to consider an Amendment to confine the scope of the exception contained in pararaph (d) of Sub-section (5) to the shares of public companies, and so to bring back into the scope of the Clause the shares of private companies?

Mr. Benson: I find myself in a position which always slightly disturbs me, the position of wholeheartedly supporting the Chancellor. I think my hon. Friend the Member for Gravesend (Sir I. Albery) has been led away by a phrase used by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), who said that tax-free contracts were contrary to public policy. I am not sure that that is not straining the situation rather far. It is true that certain tax-free contracts may be contrary to public policy, but there are innumerable perfectly legitimate relations which under certain circumstances may become contrary to public policy, but that is not to say that we must argue from the specific to the general. We are intervening, as Parliament frequently does, and as Parliament always retains the right to do, in respect of private contracts which have become too onerous. I do not think we

are really raising any basic principle. There are a number of foolish arrangements which have been entered into. There are a number of arrangements which have verged on the corrupt. I am thinking of the directors who vote themselves tax-free remuneration. Although the shareholders ought to know that the remuneration is tax-free, although the ordinary shareholders of companies whose debentures are tax-free ought to know that that is the case, the ordinary shareholder, in fact, knows very little about the financial arrangements of the company in which he invests. Therefore, there is very good ground for further investigation.
It may be that these contracts cannot be altered in the case of debentures and that we cannot make these contracts illegal in the future. But the various contracts within the ambit of this Clause ought to be considered very much more carefully and specifically, for some should be definitely forbidden. No directors' fees ought to be allowed to be paid in future tax-free, and we can evolve legislation to prevent it. As to mortgages, I cannot see any particular reason why, if anybody wants to enter into them, he should not be able to do so. It is bad, but there again it is a contract into which a man enters with his eyes open, and the mortgage can always be paid off within six months. I would not go as far as to say that these should be made illegal, in view of the fact that the average mortgage is a temporary arrangement. I do not see why bequests should be interfered with. My right hon. Friend spoke as though the widow receiving a tax-free annuity was avoiding an obligation to the community.

Mr. Pethick-Lawrence: I did not suggest that, and I saw the objection of the Chancellor of the Exchequer and said that the testator could leave his wife in an adequate position, but I objected to the widow being put into a privileged position over all other taxpayers.

Mr. Benson: Is the widow being put into a privileged position over all other taxpayers? No. I entirely disagree with that contention. A widow is left a proportion of the estate of her husband, who, if he can do it in a certain way, can leave other people something in the meantime. We do not impose taxation


for the purpose of imposing a moral sacrifice upon the taxpayer, but for the purpose of raising money. We favour the greater taxation of large incomes, not because there is anything wrong in large incomes, but because such incomes can afford a great deal more than smaller incomes. As Income Tax and Surtax rise the tax-free income has to be grossed up and attracts a higher and a higher rate. From the point of view of the Chancellor of the Exchequer this is a very excellent arrangement. When a testator having the opportunity of leaving everything to his wife arranges that she shall have a certain tax-free income up to the limit, it may be a good arrangement.

Sir Joseph Lamb: The hon. Member says that a man has every right to leave everything to his wife, but he cannot leave it tax-free.

Mr. Benson: No, or we should all do it, but he can leave the whole of his income to his wife.

Sir J. Lamb: That is a different thing.

Mr. Benson: He can leave the whole of his estate to his wife, and he has the alternative of leaving her a smaller portion and making it tax-free, and of making other requests if he wishes. I do not think that it is a matter of high public policy or of fundamental principle, but one of expediency. The Chancellor of the Exchequer should go a little further than he has done in this Resolution and look into commercial contracts, where it is far more a question of public policy and there is the possibility of corruption, though this is perhaps rather too strong a word, but the right hon. Gentleman knows what I mean.

Sir Adam Maitland: The Debates which have taken place upon this new provision have demonstrated how difficult it is to interfere with the fundamental principle of upsetting existing contracts. That is a matter which has not been sufficiently stressed. In my judgment, Parliament should be very slow indeed to depart from a principle which has always so far recognised that there should be no retrospective legislation which would undoubtedly interfere with arrangements freely and voluntarily made between parties. The De-

bates have shown that when attempts are made, no matter how justifiable, they bring before the House a good many examples of hardship and also create—the Chancellor of the Exchequer very properly put the case—greater anomalies than those that existed before Parliament intervened at all. Another matter has not been sufficiently stressed, and it might be misunderstood by anyone who is not familiar with this kind of contract from reading our Debates. It might be thought that these arrangements represent an evasion of taxation. I want to make the point, first of all, that that is not the case. The fact that a certain sum will be paid by way of interest at such a rate as would give a clear 3, 4 or 5 per cent, clearly represents an arithmetical formula. The tax is paid to the Exchequer. As my hon. Friend the Member for Chesterfield (Mr. Benson) has- said, the arrangement which provides for this provision free of tax will in many cases accrue to the greater benefit of the Treasury than would otherwise be the case. That is the point that I make from the Treasury point of view.
It is hard in these days of war to think about conditions of peace, but on the point of public policy, it would be a very dangerous thing to lay down such a suggestion as that embodied in the Amendment of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). Is there anything which is contrary to public policy in the Government making arrangements with the building societies which enable them, because of their peculiar conditions, to make their financial arrangements with a large number of people who are ordinarily exempt from the Income Tax provisions altogether? That is a matter of practicability, and, as the hon. Member for Chesterfield has said, it is not a matter of high fundamental principle but of expediency. Is there anything contrary to the public interest in the fact that in the days of peace—they may be a long way ahead, but it has happened in the past—the Treasury in its wisdom, in order to attract money from foreign countries should offer tax-free investments to nationals of other countries? There is surely nothing contrary to public policy in that.

Sir I. Albery: Does not that show that it is against the public interest? This


never happens unless the Government are very hard put to it in raising money and cannot see any other way of raising it, and they always take the first opportunity of repaying that money.

Sir A. Maitland: That is not a complete answer to what I was saying. The circumstances of the future will not be quite on all fours with the circumstances of the past. It may very well be that because we want foreign currency this will be a great consideration in our post-war conditions. No, in my judgment the Chancellor has found himself confronted with difficult circumstances created by the very high rate of taxation. I do not think we need worry unduly about the gentlemen who are presumed to be getting high fees free of Income Tax, and I will tell you why. I think these gentlemen will shortly find—many are discovering it now—that to receive fees in that form is contrary to their personal interest. What happens is this. Because of the high rate of taxation the sum paid tax-free, has now assumed such dimensions that for every pound received there is a colossal sum put on additionally to meet increased taxation, and it brings the level of surtax charged to a higher rate than it would be if higher fees were received subject to tax. The Treasury not only get the tax which is deducted, but they get tax on the tax and its cumulative effect is heavy over a period of years. These high-fee directors get such a rate as brings them within the high figure for Sur-Tax purposes. Incidentally Sur-Tax people have been harshly treated by the House because they are the people who have never had any redress from the impositions put on them by the Budget of 1931—a redress which was promised. It is said in these days that people presumed to have the money can pay, but that is quite a fallacy. People who are presumed to have the most money have the greatest possible difficulty in meeting the demands of the Treasury, and I say quite seriously that they may meet those demands once, twice or perhaps three times, but they cannot go on at the existing rate of taxation.
I believe the Chancellor has met the difficulty by a compromise. The difficulty, of course, has not altogether been removed, but the Chancellor has dealt with it in a way which meets the objections of those who believe that these legal arrangements are valid. I have not

the same objection to the principle, because I can see so many cases where it is quite right and where no possible objection can be offered. The Treasury may always be trusted so to arrange our affairs that they have the first bite, and they are still doing it, but on the whole I think the provisions which have been suggested are reasonable and go a long way towards meeting some of the objections which have been raised.

Mr. A. Edwards: I am impressed by the ingenuity of the argument of the hon. Member for Faversham (Sir A. Maitland), but methinks he "doth protest too much." He thinks we ought to help these people because they are in great difficulty. The Chancellor has made out a case for the widow, but he has not said a single word in defence of tax-free salaries, and I do not think he wants to do so. However, I would like to know whether he would accept an Amendment to make it illegal to draw tax-free salaries. The hon. Member for Faversham tried to minimise the effects of drawing salaries free of tax. Well, I happen to have a fairly substantial investment in one company whose dividends have been halved since the war, with the consequence that the market value of the shares has been halved. I wonder whether the hon. Member has thought of this case. In this particular company we go to the annual meeting and assume that the directors arc almost philanthropists and that they draw only a few hundred pounds a year each in salaries. The ordinary shareholder goes there and thinks they are doing a considerable amount of work for a nominal sum. But the company happens to have a good many subsidiary companies, and it is impossible to find out what the directors draw as directors and managing directors of subsidiary companies.

Sir A. Maitland: In the case of a parent company there is a statutory liability to declare the amount they receive as directors from the parent or subsidiary companies. The hon. Gentleman is quite right in saying that for services other than as directors, under the existing Statute, it is not necessary to declare the fees received, but surely that is a matter for ordinary amendment of our company law.

Mr. Edwards: The hon. Member is quite right, but he knows how modest directors


are and that there are ways and means of getting considerable sums of money. We cannot find out whether they are paid tax-free or not. When he talks about companies doing things, how many people turn up at the annual meeting of a company with a capital of £1,000,000? A small group of people do pretty much as they like, and when times are prosperous nobody interferes. But nowadays more people turn up, and some want to know a few things. For the first time in their lives certain directors are being questioned, and quite rightly. However, I think the Chancellor should not allow this occasion to pass without rendering it illegal for directors to draw salaries free of tax. It is not fair to the company, it is not honest, and I do not think the directors doing it are doing the decent thing. Why should they not say quite plainly, "We cost the company a certain amount of money each year"? It must be for some dishonest purpose if they do not disclose that, and I hope the Chancellor will agree to accept an Amendment which will declare such agreements as that quite illegal.

Mr. Craik Henderson (Leeds, North-East): So far most of the speakers to-day have appeared to think that the Chancellor has, possibly, not gone far enough, but I would like to raise one or two points as to whether he may not have gone too far. The worst of well-meaning legislation is that there is often the danger of doing more harm than you do good. I agree with previous speakers that this is a purely practical question. It is quite ridiculous to say that if a man leaves his wife £1,000 free of Income Tax, he is thereby doing something contrary to the public interest, but that if he gives her £2,000 subject to Income Tax, that is quite a meritorious and proper thing. The Chancellor probably thought, rightly or wrongly, that there were certain problems that must be dealt with, but I think he was in a little difficulty to-day in that, in defending his action in not dealing with preference shares, he put forward the arguments which applied equally to his own proposals. For example, in declining—I believe properly—to bring preference shares within the ambit of these provisions, my right hon. Friend said, first, that these payments are the result of contractual obligations and that con-

tractual obligations ought not to be interfered with. I am sure he fully realises that a great many of the deeds at which he is now striking are equally the result of contractual obligations; and I think Parliament should interfere very reluctantly with contractual obligations, unless it is absolutely necessary to do so. The second thing which the Chancellor said with regard to preference shares was that if he were to make the provisions apply to them, it would affect the value as between ordinary and preference shares. Obviously, it is true that thereby, by a stroke of the pen, the ordinary shareholders would be benefited to the detriment of the preference shareholders, but surely that is exactly what the Chancellor is doing at the present time, by these provisions, with regard to the annuitant and the residuary legatee.
Perhaps this point has not been sufficiently stressed. Suppose that a testator quite deliberately worked out the minimum sum that would provide for his wife and made that sum free of Income Tax; and suppose he provided that the residue should go to some other people in whom he had not the same interest, for instance, a charity or some other relative, by the provisions which have now been introduced, the Chancellor gratuitously and, quite contrary to the intentions of' the testator, makes a gift to the residuary legatee of 3s. in the £or whatever the sum may be. I submit that there ought to be some safeguard against too gross hardship being inflicted on the annuitant. I suggest that the Chancellor would have achieved his aim, and at the same time inflicted less hardship, if he had given the right to go to the courts and show cause why these payments should not be tax free. I still believe that there should be some proviso to safeguard the position of the annuitant who is probably being much prejudiced to the advantage of somebody else in whom the testator had not so much interest. I think that when Parliament intervenes in a case of this sort, it should try to see that substantial justice is done between the two interested parties, and that where there is no question of anything unlawful having been done, the position between the two parties should be kept equitable as far as possible.
The other point I want to make is whether my right hon. Friend has kept in view that the result of these proposals


may be that charities will be prejudiced. As things are at present, a man may say to himself, "I want my wife to have £1,000; I know what her obligations are, and I want her to have £1,000"; and therefore, he provides in his will to leave her £1,000 free of Income Tax, and to leave the residue to charity. I think the Committee would be surprised to know how frequently in wills the wife is given an annuity of a certain amount and the residue goes to various charities. Now if tax free payments were illegal a man would not be in the position of determining in a direct manner that his wife shall receive £1,000, and I think the tendency would be that testators would be inclined to provide that the whole estate shall go to the wife, or that the wife shall have the complete income, and that the trustees shall be given discretion to draw on capital. The result of such proposals might be that the amount going to charities would be diminished. I should like my right hon. Friend to keep in mind particularly the point whether something cannot be done to deal equitably with the position between the annuitant and the residuary beneficiary. There is, in my opinion, no justification for giving the residuary beneficiary a benefit which the testator never intended.

The Solicitor-General (Sir William Jowitt): I want to bring this matter to a head after what, I think, has been an interesting and informative discussion. I confess that when I first applied my mind to this matter and wondered what advice I should tender to my right hon. Friend the Chancellor, I found that, in the course of our discussions, my mind fluctuated from time to time and the advice which I expressed round the table altered from time to time. I think that anybody who considers this matter with no preconceived or a priori or political ideas will probably have the same experience. It is necessary to get one question clear in one's mind, and that is, on what ground are we interfering? After all, it is quite sound to say that it is a paramount matter of public policy that we do not unnecessarily interfere with the freedom of contract. There may be some moral issue or something of that sort which compels one to do so, but there is no issue of that sort here, and the highest at which it can be put is that it is a question of convenience.

Therefore, we have to ask ourselves on what basis are we interfering.
There were two rival bases. One was that the public convenience was such that this sort of contract ought to be disallowed and ought not to be made; and the other was—and it leads to quite different results—that the people who made these contracts in pre-war days had no conception of what taxation would be, and that by arbitrarily altering the bargain they made, whether by deed or by will, we are really giving effect to what the testator or the contractor would have said had he been alive and had he known what the position is to-day. On the whole, I came finally to the conclusion that it was the latter basis and not the former basis on which we ought to act. Once one accepts that, it follows that one has no justification for interfering with or altering contracts or wills which have been made with a full knowledge of the facts. For instance, if three or four months ago somebody made some provision by contract, deed or will, knowing full well what the rate of Income Tax was, and stipulated that somebody—friend or relative or wife—was to be paid a certain amount free of Income Tax, I see no possible ground on which we could interfere with such a contract, except on the ground that the contract is so much against the public interest that it ought to be struck at as one would strike at an immoral contract. Having rejected that view, we naturally did not interfere with such contracts.

Mr. Pethick-Lawrence: My right hon. and learned Friend says that he can see no grounds, and that the man acts with full knowledge of all the facts. I venture to suggest that he does nothing of the kind. He may know what the Income Tax is in this particular year, but he is in complete ignorance of what it may be in the year 1942–43, and he is still more in complete ignorance as to what it will be in 10 years' time.

The Solicitor-General: That is true. He cannot foresee the future, but he knows perfectly well that Income Tax is in the region of 10s., and that in all probability, unless the Chancellor of the Exchequer can be a good deal more lenient to us than I fear is the case, we shall be for some time in the region of a very high rate of tax. Supposing a man


with that knowledge has left£200.or£2,000 a year free of tax. Upon what right are you going to interfere with the arrangement he has made? We came to the conclusion that we could not interfere with these contracts, and once that principle is accepted, it follows that we do not interfere with the future either. We simply interfere with a contract which has been made in the past for the reasons I have given. Anyone who applies his mind to this carefully, and thinks out what he can do, will find himself in extraordinary difficulties.
The right hon. Gentleman has not the advantage of a Parliamentary draftsman. He fell into an error, and we can understand that and sympathise with him; but, even if he had had that Parliamentary draftsman at his beck and call, he would have found it extraordinarily difficult to know what to do. For instance, would he in the future eliminate that part of the Clause which provides for freedom from tax? If there was an annuity of £200 a year free of tax, would you treat it, not as null and void, but simply as being an annuity of £200 a year? If so, you are getting into the region of the three parts into which Gaul used to be divided. Firstly, there would be the pre-war part, which you would treat effective up to 5s. 6d. Then there would be the period between the war and to-day, which you would allow to operate fully with no retrospective alterations, and the third case you would treat as effective only in so far as it was an annuity and you would eliminate the free-of-tax part. The difficulties are immense, but once we have accepted the principle which I have indicated, I think we have done all we reasonably can.
There are one or two other matters to which I should like to refer. It also follows from accepting that principle that so long as parties, with their eyes open and with the full knowledge of the facts, make an arrangement, we should not interfere. I apply that to directors. So long as the shareholders of a company have, with a full knowledge of the facts and a knowledge of all the implications of what it really means, made a contract, it is very difficult for us to interfere. There are, I believe, cases, although I have never seen one, in which directors are sometimes paid fees not only free of In-

come Tax, but free of Surtax. Supposing you were to pay a director £5,000 a year free of all taxes, the sum involved would be in the neighbourhood of £100,000 a year. I should like to see a resolution put before the shareholders in this form: "We propose to pay A.B. the sum of £100,000 a year, which will yield him £5,000 a year free of taxes." So long as the shareholders decide to pass such a resolution—and, after all, it is their money —knowing perfectly well what they are doing, I do not see that we can interfere. Therefore I think the Chancellor of the Exchequer has thrown out what seems to me to be a very useful suggestion. He may pursue this matter with the President of the Board of Trade, to see whether, by some alteration to our Company Acts, we can assure that the fullest possible disclosure is given, so that the shareholders in the company, and all the world, know precisely what is being done.
Now I come to the distinction between the exceptions we have made in regard to preference dividends. We have had interesting suggestions from the hon. Member for Tamworth (Sir J. Mellor. I can assure him that this matter has given us a great deal of thought, and that we have not, as it were, brought down a portcullis upon further thought. He has made an interesting suggestion, that it is possible to differentiate between a private and a public company. I very much doubt that. There are transactions and sales of preference shares or ordinary shares in both companies. People, in making up their minds how much they will pay for shares, consider what privileges are attaching, and it seems to me that the same sort of objections will apply equally to private and public companies. The suggestion has been made, however, and I know the Chancellor of the Exchequer will consider it as well as the other suggestions which have fallen during this very helpful Debate. I submit that the Chancellor of the Exchequer, in dealing with the matter in this way, is endeavouring to give effect to what the various persons making these provisions would have done had they been here, in the light of present circumstances. I suggest that it is the safest and wisest course to pursue, and that to pursue other courses would land us in very great difficulty. I hope, therefore, that the Committee will proceed to give us our Clause.

Mr. Ernest Evans: The Solicitor-General has told us that this has been a helpful Debate. I am sorry that I cannot agree with him, because the Chancellor of the Exchequer made the most preposterous speech which any Member has ever heard from any Chancellor of the Exchequer. His speech to-day consisted of a series of statements, that he was not expressing his own view but the views which had been published outside, and that he had had no time to read the Report of yesterday's Debate. The Chancellor of the Exchequer is the last man I would wish to attack, but he told us to-day that he had read the reports in the "Times" and the "Manchester Guardian" and that from these reports be had drawn certain conclusions as to the criticisms made yesterday.
I wish to confine myself to two points. The first is in connection with what the Solicitor-General said a few minutes ago in regard to companies. I think he rather exaggerated the difficulties of dealing with the situation. He referred to the powers which shareholders have in their hands in regard to the fixing of fees. I do not suppose anyone has more experience of company working than the Solicitor-General, and I want to ask him whether the Government will introduce an amendment to the Company Acts which will ensure that the shareholders of a company shall know exactly what fees are being paid to directors, irrespective of the incidence of Income Tax. I think that is a perfectly fair question to ask.

The Solicitor-General: From my understanding of the Chancellor's statement, the Answer is "Yes" He did, however, guard himself by saying that he had to consult the President of the Board of Trade. Obviously he cannot give a definite assurance without the approval of the President of the Board of Trade.

Mr. Evans: That is a perfectly fair answer to my question, and I am satisfied with it, but I hope that the right hon. and learned Gentleman, with all his experience, will use all his influence to get that very fair reform effected, because it is one which impresses itself very much upon the country generally. There is a sort of suspicion about the existence of companies and the way in which their operations are conducted. I do not think there is really much difficulty about gifts

left by will. It is only right to put up this principle that, whatever may be the wishes of any particular testator, his widow and family shall have to bear exactly the same responsibility as any other member of the community for the additional taxation which circumstances may enforce upon us.

Sir Joseph Lamb: I should like to support what the hon. Gentleman has just said with regard to articles in the Press. I consider that Members of the Government have a right to read the Press, the same as anyone else, and I hope they do. But I do not think they have a right to tell the House of Commons, what the Press thinks we ought to do. The House of Commons is the place where that should be said by its Members elected for the purpose. We were asked by the right hon. Gentleman on what grounds of principle we view this new Clause. I agree with it, and with the principles involved in it, but I do not agree with the exceptions that are being made, because I hold most strongly that no exceptions should be made to the principle of the obligation which rests upon every member of the community to pay taxation. It is a national obligation and a responsibility upon the individual to pay taxation, and any relief from that should come from the Government themselves when they are imposing the taxation. Money left under wills and money paid to directors is all a matter of income, and should be treated in the matter of relief given on the basis of Income Tax as to the amount that the individual receives and his ability or otherwise to meet the obligations placed upon him.
I agree with the new Clause, except that I think it should apply to all, both before the war and since, because all contracts are made under conditions existing at the time. We do not know what Income Tax will be in the future. People say it cannot possibly be more than 10s., but we do not know what is possible until the war is over, and a contract made now that it should be tax-free, which 1 understand would not come under the Clause, would be under the condition that Income Tax was 10s., or possibly something more. We do not know what the conditions may be in the future. All money received under this would be income and should be treated as income for the purpose of taxation and relief of taxation.

Mr. G. Strauss: Where a company is paying a salary free of tax, and under the provisions of this Bill will be allowed to continue to do so, I suggest that it is not only the relationship between the company and the manager himself that is at stake, but that the State has an interest in that payment by the company of a very large sum for the manager. The effect of deducting a large sum from the profits of a company so that the manager may be able to receive the£2,000 to which he is entitled free of tax will sometimes, possibly often, substantially affect the Excess Profits Tax assessment of the firm. It may be that in the case which the right hon. and learned Gentleman gave, where the "manager is entitled to £5,000 a year free of Income Tax, the company has to put aside a very much larger sum which is deducted from the profits of the company, and the Excess Profits Tax assessment, as I see it, will be very materially affected and the revenue may lose substantially. I may be wrong, but I should be very much obliged if the Solicitor-General would enlighten me on the point.

Mr. David Adams: The point that I desire to raise is very much on the lines indicated by the previous questioner. The Chancellor has dealt with what he terms the sanctity of contract. I have had the greatest difficulty, and am still unable to appreciate where the sanctity of contract comes in with regard to beneficiaries under wills, because, clearly, those who made the arrangement could not have anticipated what the taxation of the future would be, and there was nothing sacred in the engagement they made that taxation should not be increased with the necessities and urgencies of the country. The purport of the two Amendments is to deal with that situation and to see that the interests of the Chancellor and of the country are not impaired. For that reason I am sympathetic towards the Amendment, particularly that of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). Perhaps the Chancellor will take the advice that has been tendered to him and bring the matter to an end this year.
But the particular matter that I wanted to raise is with regard to the question of contracts. Complaint has

been made regarding tax-free contracts and the question whether they should or should not be prohibited in future. There is another form of contract which I find is being violated, in my judgment to the detriment of the community. I refer to contracts in the cases of persons who retire from business, by which they are entitled to certain pensions. In a case I have in mind the pension is £3,000 per annum. This happy individual is not content to receive £3,000, which would bear a proper portion of taxation, and a new contract is being made under which this sum will be commuted for a capital sum, which I am advised is £35,500. It is clear that if such an arrangement is tolerated the Chancellor of the Exchequer will be deprived of a considerable sum of money and the retired manager concerned will have benefits of a new sort for which he did not originally contract with the company. The question I should like to ask, which is of considerable importance not only to companies but to the revenue, is whether such a new arrangement deliberately entered into to avoid payment of taxation is legal, and, if it is legal, whether steps will be taken to make it illegal.

Question, "That the Clause be read a Second time," put, and agreed to.

The Financial Secretary to the Treasury (Captain Crookshank): I beg to move, as an Amendment to the proposed new Clause, in line 5, after "court," to insert "in any local or personal Act."
I must apologise to the Committee for having to move this manuscript Amendment. It is due to the fact that the definition in the first paragraph is not quite complete. There are cases where there is provision in either a local or a personal Act. Our attention has been more particularly called to it by a speech made in the Committee yesterday.

Amendment to the proposed new Clause agreed to.

Further Amendment to the proposed new Clause made: In line 53, after" order, "insert" local or personal Act." —[Captain Crookshank.]

Motion made, and Question, "That the Clause, as amended, be added to the Bill," put, and agreed to.

NEW CLAUSE.—(Modification of provisions for tax-free salaries, pensions, etc.)

(1) This Section applies to offices, employments, annuities, pensions and stipends taxed under Schedule E, where by virtue of—
(a) some provision which is contained in a contract (whether oral or in writing) made before the third day of September, nineteen hundred and thirty-nine, and which has not been varied on or after that date; or
(b) some provision which is contained in an enactment passed before the said third day of September and which has not been amended on or after that date,
the emoluments include a payment to or for the benefit of the recipient of the emoluments in respect of his Income Tax.

(2) The amount, if any, payable, in a case to which this Section applies, to or for the benefit of the recipient of the emoluments in respect of his Income Tax for the year 1941–42 or any subsequent year of assessment, other than Surtax, shall not exceed the amount which would have been payable if the 1938–39 rates of tax, other than the rates of Surtax, had applied to the year of assessment in question.

(3) The amount, if any, payable, in a case to which this Section applies, to or for the benefit of the recipient of the emoluments in respect of his Surtax for the year 1940–41 or any sub sequent year of assessment shall not exceed the amount which would have been payable if the 1937–38 rates of Surtax had applied to the year of assessment in question.

(4)In a case to which this Section applies the recipient of the emoluments shall be entitled to the following adjustments of his liability to Income Tax for the year 1941–42 and Surtax for the year 1940–41, that is to say, his total emoluments for the purposes of the said Income Tax, and his total income for the purposes of the said Surtax so far as it is ascribable to the emoluments, shall be reduced to what they would have been if in his case—
(a) the rates of Surtax in force for the year 1937–38 had applied also to the years 1938–39, 1939–40 and 1940–41; and
(b) the 1938–39 rates of Income Tax, other than Surtax, had applied also to the years 1939–40 and 1940–41; and
(c) the rights and liabilities of the per sons concerned had been modified accordingly. —[ Captain Crookshank.]

Brought up, and read the First and Second time, and added to the Bill.

NEW CLAUSE.—(Interpretation of provisions of this Act relating to tax free payments and power to make regulations.)

(1) For the purposes of the provisions of this Act relating to tax free payments—
(a) a provision, however worded, for the payment of such sum as will after deduction of income tax be equal to a stated amount, shall be treated as a provision for the payment of the said stated amount free of income tax, other than Surtax; and

(b)the expression "a stated amount" includes a stated fraction of the gross amount of any specified income (that is to say, of the amount of that income before income tax has been charged thereon, whether by deduction or otherwise), but does not include a stated fraction of the net amount of any specified income (that is to say, of the amount of that income after it has been charged to income tax, whether by deduction or otherwise);
(c)the expression "if the 1938–39 rates of Income Tax, other than Surtax, had applied" means, in relation to a year of assessment, if the standard rate of tax for the year had been five shillings and six pence in the pound and the provisions of the Income Tax Acts relating to relief from tax had not been amended in any respect by any Act passed since the third day of September, nineteen hundred and thirty-nine.

(2) The Treasury may by regulations provide for adjustments between parties where payments to which the said provisions of this Act apply have been made before the passing of this Act otherwise than in accordance with those provisions. — [Captain Crookshank.]

Brought up, and read the First and Second time, and added to the Bill.

NEW CLAUSE.—(Repeal of obligation of Crown to pay interest on funds in Court free of tax.)

In Sub-section (1) of Section one hundred and forty-one of the Supreme Court of Judicature (Consolidation) Act, 1925 (which provides that certain funds in court shall bear interest at the rate of two per cent, per annum together with any Income Tax chargeable thereon), the words "together with any Income Tax chargeable thereon" are hereby repealed as from the first day of October, nineteen hundred and forty-one. — [Captain Crook-shank.]

Brought up, and read the First time.

Captain Crookshank: I beg to move, "That the Clause be read a Second time."
The position is that on securities lodged in court by suitors at present 2 per cent, free of tax is payable. That provision was made as long ago as 1872, when Income Tax was 4d. in the pound. It seems no longer defensible that this advantage should be enjoyed by suitors whose money it is, and in order to bring it into line roughly with the Clauses we have passed, I move this new Clause.

Question put, and agreed to.

Clause read a Second time, and added to the Bill.

NEW CLAUSE.—(Extension of power to exempt from key industry duty.)

The power of the Treasury, under Subsection (5) of Section ten and Sub-section (1) of Section twelve of the Finance Act, 1926, to exempt articles from the duty imposed by Section one of the Safeguarding of Industries Act, 1921, as amended by the said Act of 1926, shall extend to all articles for the time being chargeable with duty under the said Act of 1921, whether as amended by the said Act of 1926 or by any subsequent enactment for the time being in force. —[Captain Crookshank.]

Brought up, and read the First time.

Captain Crookshank: I beg to move, "That the Clause be read a Second time."
This new Clause is necessary to amend a flaw which has been discovered in the course of the review that we are making and that has been announced in the House with regard to modifications which may be brought forward later on of Customs duties. We find that under the law we have not got the power to exempt certain categories of duties which have been imposed by the Key Industry Duty Acts. In 1921, under the Safeguarding of Industries Act of that year, certain goods were chargeable, but in 1926 the Finance Act added certain other goods and made arrangements by which there should be exemption powers. In 1936 the Finance Act extended into another category of goods, but we are now advised that on legal grounds the exemption powers were not thereby extended also. It is to make it possible for us to deal with the whole scale of the duties and exempt it if we desire to do so that this Clause is moved.

Question put, and agreed to.

Clause read a Second time, and added to the Bill.

NEW CLAUSE.—(Extension of Section 8 of Finance Act, 1940, to officers and men of the Merchant Navy.)

Section eight of the Finance Act, 1940, which authorises the issue of a permit to use a mechanically-propelled vehicle on roads to a member of any of His Majesty's naval, military or air forces when on such leave as is mentioned in Sub-section (2) of the said Section shall have effect so as to include among the persons to whom the permit may be issued any officer or man of the Merchant Navy on leave from service on an ocean-going merchant vessel and the Minister of Transport may make such regulations under the authority of Sub-section (4) of the said Section eight as to the form of the permit and the insurance policy on the vehicle as may be necessary to provide for the

issue of permits to such officers and men. — [Mr. Denville.]

Brought up, and read the First time.

Mr. Denville: I beg to move, "That the Clause be read a Second time."
I believe that this new Clause will meet with the general approval of the Committee and of the Chancellor of the Exchequer. In moving it, I can quote Shakespeare and say that we are not appealing to stony hearts or brassy bosoms. The purpose of the Clause is to place men of the Mercantile Marine in the same position as members of the Forces. They are doing actual fighting work and are looked upon as members of the Fighting Forces. They have short leave, and they have their cycles and motor cars, but they are bound to pay the full rate of duty if they use their vehicles. For the payment of 2s. for a cycle or 10s. for a motor car men of the Forces can get a 21 days' licence for using during their leave. I do not think we need discuss the merits of the proposal; nothing but merit stands out. These men are entitled to the same facilities when home on leave as men in the Forces. They have crossed the sea in a merchant vessel, possibly with a gun on board, and in more than one case men of the Mercantile Marine have accounted for an enemy aeroplane. They do their duty in many shapes and forms and sacrifice themselves for the country, and the least we can do is to do something for them in return.

Captain Crookshank: I must ask the Committee not to accept this Clause, because it is drafted in such a form that it will not fit the case. However, my right hon. Friend the Chancellor, like everybody else in the Committee, supports the idea at the back of the new Clause, and if the Committee will agree not to insert it he or I will put down an appropriate Clause to effect the same object on the next stage.

Mr. Denville: On that assurance, I have very great pleasure in withdrawing the Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment as to registration in relation to Purchase Tax.)

Section twenty-three of the Finance (No. 2) Act, 1940, shall have effect as if the following Sub-section were inserted after Sub-section (1) there of:


(2) Notwithstanding anything in the preceding Sub-section, the fact that the gross takings from sales of chargeable goods of an applicant for registration as a wholesale merchant do not, on the average, exceed two thousand pounds per annum shall not disentitle such applicant to be registered as a wholesale merchant, if he satisfies the Commissioners that he is carrying on in the United Kingdom a business of selling goods not of his own manufacture to—
(a) persons buying such goods for the purpose of selling them again; or
(b)persons selling such goods as materials in the manufacture of other goods." —[Mr. Riley.]

Brought up and read the First time.

Mr. Riley: I beg to move, "That the Clause be read a Second time."
The purpose of this new Clause is to remove an anomaly which has developed since the Purchase Tax was introduced which was probably not anticipated when it was put on the Statute Book. The anomaly is that in certain circumstances Purchase Tax is charged twice upon the same article. It will not be denied, I think, that that is an anomaly; it will not be contended that it was the intention of Parliament that Purchase Tax should be charged twice over. It is in these circumstances that the anomaly arises. The provisions as to the Purchase Tax provide that a wholesaler who buys goods from a manufacturer and sells them to retailers shall be entitled, if his business exceeds £2,000 a year, to be registered as a wholesaler and to acquire his goods from the manufacturer free of tax. It is also provided that if a trader is doing business part of which is wholesale business and the other part retail, or if his business is entirely wholesale but does not reach £2,000 a year, then he is not entitled to be registered as a wholesale dealer, and when he buys goods from the makers he must pay Purchase Tax on them. As he is not a registered wholesaler, however, when he sells those commodities to another wholesaler he cannot recover the tax which he has paid providing that the wholesaler to whom he sells does a trade exceeding £2,000 a year and is therefore entitled to be registered. The second wholesaler is, however, under obligation to charge the tax to the retailer, and thus the circumstances arise under which tax is charged twice upon the same article. To show that there is no doubt about it I will read an extract from a letter from

the Secretary's office at the Custom House. It says:
Under the provisions of Section 25, subsection (1) of the Finance Act, 1940, manufacturers and wholesale merchants whose gross takings from the sales of chargeable goods have not on the average exceeded £2,000 Per annum are precluded from registration, and as your client's turnover falls far short of the statutory figure registration has accordingly to be refused. If he purchases the substance called ' liquid fire ' from a registered manufacturer he will consequently be required to buy it at a tax inclusive price. Where he sells to unregistered persons no further tax as a wholesaler will accrue, but where he sells to registered persons such persons will be accountable for tax again when they resell the goods.
It is therefore perfectly clear that under those circumstances Purchase Tax is charged twice on the same article. That cannot be disputed, and my point is that that is clearly a departure from the intention of Parliament. It cannot have been intended that a consumer should have to pay the double tax in the way I have described. My Clause is designed to remove that anomaly by providing that the fact that his trade as a wholesale merchant does not on the average exceed £2,000 a year shall not debar an applicant from being registered as a wholesale merchant if he satisfies the Commissioners that he is carrying on in the United Kingdom a business of selling goods not of his own manufacture to
(a) persons buying such goods for the purpose of selling them again; or
(b) persons selling such goods as materials in the manufacture of other goods.
In other words this Amendment seeks to place the wholesale trader whose business does not reach £2,000 a year on exactly the same footing as the wholesaler who is entitled to be registered because his trade exceeds£2,000. I submit that it is a reasonable Clause, securing equality among all classes of traders, and I hope that the Chancellor will see his way to accept it. In any case if the Government cannot accept the removal of the £2,000 limit may I suggest that it should be reduced to £1,000, which I think would be regarded as a suitable sum?

Captain Crookshank: The hon. Member for Dewsbury (Mr. Riley) has put his case clearly, and it is a good thing that the Committee should consider it, because it shows that we are prepared to consider big things as well as small things, for


while the hardship on individuals may be quite considerable, it is a very minute section of the community which is affected by the Purchase Tax and only a very small proportion of the manufacturers. But that is all the more reason why the position should be brought to our notice. The Committee will know that the £2,000 limit for the registration of manufacturers was not only called in question in the original Debates upon the Purchase Tax but that it has since then been the subject of considerable discussion. My right hon. Friend the Chancellor has received deputations on the subject, as I have, and the whole question whether £2,000 shall be the limit or whether it shall be reduced is now under the consideration of my right hon. Friend. I think the hon. Member would be the first to agree that this consideration is intimately bound up with that particular aspect of the problem.
The hon. Member has stated the case, and my right hon. Friend will certainly study it, in the light of his consideration of the other problem with which it is very interconnected. May I therefore ask that we should leave it at that and not proceed now with the proposed new Clause? I would add that, if my right hon. Friend decides to take action against the £2,000 provision or to do some other thing about the problem, the alteration does not have to be inserted in the Finance Bill. The general difficulty can be cured by Treasury Order, under Section 23 (9) of the Finance Act (No. 2) of last year, which Order is subject to the approval of this House. There will therefore be an opportunity at that stage for the matter to be further reviewed, should it be proposed to do anything further.

Captain Strickland: I was very glad to hear the Financial Secretary to the Treasury make his announcement. This matter has been very seriously considered by various trades. It is not so insignificant in its incidence on the country as might possibly be conveyed by the speech of the Financial Secretary. The position at present is that an unregistered manufacturer or merchant who is also a retailer can sell his goods to the ultimate purchaser, either at an undercut price and less than that which the registered manufacturer must charge in putting his goods on the market, or he can charge the market price and put into his own pocket

the amount of the Purchase Tax which the other manufacturers have to charge.
A concrete case which illustrates this aspect of the question is the bicycle trade. It is a very important trade. The practice which I wish to describe to the Committee is in fairly wide use in the country. For comparison, let us take the figure of£4 10s. as the whole price of a complete bicycle bought from a registered manufacturer for sale to an unregistered seller. The manufacturer has to add 33⅓ per cent. Purchase Tax before he can sell that bicycle at the wholesale price, and that would make the cost price of that bicycle £6. To that figure has to be added in due course the profit of the retailer, which we can, for the sake of comparison, call£1. A customer buying the complete bicycle would therefore have to pay £7, because it was bought from a registered seller. If a rival retailer likes to buy those bicycle parts and assemble them himself, he avoids the Purchase Tax charge which would have been imposed upon him, and he can then sell the bicycle to the customer, less the Purchase Tax which his rival has to charge. Alternatively, he can charge the extra 33⅓ per cent. sell at the market price and put into his own pocket the balance, which would, in the ordinary way, have gone to the Treasury. This can happen, always providing that the trade of the assembler does not exceed £2,000 a year.
The effect of the reduction foreshadowed in the Clause—which I do not think goes far enough, because the figure should be reduced to about £ 500 — applies to other trades as well. We may take the printing and stationery trade as a case in point. Not more than about 20 per cent. of the printers in this country have to be registered, but they nearly all can deal in articles which come under Class 21. I need not go very deeply into this illustration, but it should be obvious that when an unregistered seller wants to place an order for printing which includes chargeable goods, he is more likely to go where he can get the things cheaper, that is to say, by buying from an unregistered printer whose total output in the particular sales does not reach £2.000.
Another trade affected very considerably is that which deals in silk and rayon. There is a custom in that trade by which the yarn producer sells yarn to a weaver. The yarn producer is not a registered


manufacturer because his yarn is not among the chargeable goods. By the custom of the trade he guarantees his yarn in the weaving of the cloth. If there should be a fault in the cloth, by virtue of a fault in the yarn supplied, the weaver, whose goods are registered and chargeable, returns the faulty cloth to the yarn producer. As the latter is not registered, the weaver has to charge the Purchase Tax back to the yarn producer. The yarn producer then has to sell the cloth which has a fault in it, and when he sells to an unregistered person he has to charge that Purchase Tax on his sales, in competition with those people whose trade in faulty cloth does not come to £2,000, and he is bound to bear that first Purchase Tax himself if he hopes to sell his cloth.
Having "borne that first Purchase Tax, when he sells to an unregistered purchaser he has to charge Purchase Tax. Therefore, two Purchase Taxes are charged on exactly the same material and the Treasury gets the benefit. This is a very serious matter. I am glad that we have had an assurance this afternoon. The permission in Section 23 (9) has been in operation for 12 months and the Treasury have been aware of the increasing tendency of sellers to go to people who have not to be registered. This is to the detriment of the registered manufacturer. Deputations have waited on the Treasury about the matter. This is a good opportunity to ask the Treasury to expedite the inquiry and, if possible, to concede the point which was put so well by the hon. Member for Dewsbury (Mr. Riley). The proposal should appeal to the common sense of the Treasury as an adjustment that ought to be made forthwith, with as little delay as possible.

Mr. Riley: In view of the statement made by the Financial Secretary to the Treasury that the matter will have further consideration, I beg to ask leave to withdraw the Motion and the Clause. There is a clear anomaly which results in the tax being charged twice on the same article and in the consumer having to pay double. This was never intended.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment of provisions as to Purchase Tax.)

So much of Part V of the Finance (No. 2) Act, 1940 (relating to Purchase Tax), which provides for certain goods being chargeable at

the reduced rate shall be repealed and the Seventh Schedule to that Act shall have effect as if—
(a) the second column were deleted;
(b) the words in paragraph 1, third column "Garments or footwear of a kind suitable for young children's wear, except as specified in the first column. Protective boots designed for use by miners, or quarry-men, or moulders. Clogs," were deleted;
(c)after the words "Sanitary ware" in paragraph 4, third column, there were inserted the words "Articles of china, porcelain, earthenware, stoneware or other pottery ware, of a kind used in the preparation or serving of food or drink;"
(d)in paragraph 5, third column, there were inserted the words "Glassware of a kind used in the preparation of serving of food or drink, not being cut glass."
(e)in paragraph 9, third column, there were inserted the words "Enamelled hollow- ware and other iron and steel hollow-ware of a kind used for domestic purposes."
(f) paragraph 19 were deleted. —[Mr. Barnes.]

Brought up, and read the First time.

Mr. Barnes: I beg to move, "That the Clause be read a Second time."
I understand that there is some little dispute among draftsmen as to whether paragraph (b) is correctly worded. I should like to make it clear to the Committee that it in no way destroys the main purpose of the proposed amendment of the law. If I am able to persuade the Chancellor of the Exchequer and the Committee to accept my point of view we can leave it to the Chancellor to put the matter into correct order later: The main purpose of the proposal is to delete the articles subject to Purchase Tax and liable to 16⅔ per cent. tax. I would ask the Committee to review the circumstances which have arisen since the Purchase Tax was introduced. Apart from the merits or demerits of the tax as a method of raising money at its inception, my contention is that subsequent events have entirely destroyed its desirability or advantages. I would appeal to the patience of the Committee while I endeavour to make the position clear. It is probably not fully understood.
I am naturally opposed to the Purchase Tax, but this Clause only really deletes one column, which, I think, would cause the Chancellor to lose about half the revenue from it. I am really giving him the opportunity, if he is disposed to


take it, of getting out of this difficulty in two stages instead of "going the whole hog" at once. The reasons given for the introduction of the Purchase Tax were quite specific and clear. The Chancellor stated that he sought to raise revenue and discourage expenditure by this tax. He estimated to receive a revenue of £110,000,000, but the development of those other circumstances connected with the war to which I have referred reduced that yield in the" first year from £110,000,000 to £70,000,000, and subsequent developments may make further inroads on that figure. This Clause would probably deprive the Chancellor of revenue to the amount of approximately £40,000,000 in the year.
Let me make out my case. My contention is that the sum of £40,000,000 obtained from the operation of the Purchase Tax is not in fact net revenue to the State. That is my first main contention. I base it on the fact that approximately half of the nation's income is now being spent, in one form or another, on Government account, and therefore any factor which leads to an increase in the cost of production, either in wages or material, on a vast expenditure of that description must be set off against the revenue derived from the tax itself. I claim that the Purchase Tax has substantially increased prices over a wide range of goods. It leads to the stimulation of the demand for higher wages and therefore increases production costs. What are to-day the factors.that influence a demand for higher wages? They are not the basic foodstuffs, because the Government in that direction have consistently followed the policy that they laid down at the outbreak of war, namely, that they would endeavour to control prices to avoid the vicious spiral which, during the last war, led to inflation. In the "field of basic foodstuffs the Government have been successful in their stabilisation policy. Therefore, the only other two ranges of goods left as factors intervening to compel wage demands from the wage-earners of this country are those ranges of foodstuffs which the Government have not controlled and in respect of which they have allowed excessive profiteering to take place, and those ranges of goods in which the Purchase Tax has deliberately- increased prices substantially.
Let us test it by means of the Ministry of Labour index figures. Taking the figure of 100 per cent, to represent the level at 1st September, 1939, by October, 1940, food prices had risen to 122. In May, 1941, food prices were still at 124, that is, a rise of 2 per cent, from October to May and a rise of only 24 per cent. from 1st September, 1939. But coming to clothing and goods of that description, on 1st October, 1940, they stood at 144 and on 1st May, 1941, at 175. Therefore, during the period of the operation of the Purchase Tax food prices, despite the uncontrolled elements, advanced only 2 per cent., whereas the price of clothing advanced 31 per cent. Taking points instead of percentage, it was 200 points and has gone up to 250 points, a very substantial increase.
Another reason advanced was that we were faced with the alternatives of the Purchase Tax or inflation. No one wishes to see inflation, but it is grotesque to present to the House of Commons in dealing with matters of this kind that inflation is the alternative to the Purchase Tax, when the Purchase Tax has been the instrument of securing the most substantial rise in prices over the whole field of commodities that has taken place during the war. It is entirely beside the point to use the argument that the Purchase Tax is justified on the plea of inflation. I will go on to prove later that that contention of mine is supported by other measures which the Government have been compelled to introduce for the purpose of safeguarding the nation against inflation; it is those measures which are material in that direction, and not the Purchase Tax. Let me take one or two items. Footwear prices are now 55 to 60 per cent. above those of 1939, flannelette 87 per cent., furniture 134 per cent., galvanised buckets 87 per cent. I have just taken one or two items here and there to show what a difference there is in the prices of these commodities compared with 1939. I contend that the Treasury has lost more through this tax than it has gained in revenue.
May I now turn to the second range of reasons, namely, that the purpose of this tax is to discourage expenditure? No more stupid argument has ever been submitted to the House of Commons to justify a tax than that. All who are connected with trade and industry know very


well that instead of having reduced consumption the Purchase Tax was the one factor which led to enormous advance buying prior to its coming into operation. It was estimated that something like£200,000,000 went in advance buying. It was encouraged by all the traders, naturally, for the purpose of anticipating the tax, and instead of interfering with the consumption of goods it was a very important factor in stimulating it, which was entirely contrary to the argument advanced in support of the tax. What have been the subsequent effects? It has been harmful in many ways. The Committee now see the logical consequences of a stupid tax of this kind, which forces artificial buying instead of preventing it, in the scheme for the rationing of clothes. I will deal with that again later on.
While I am dealing with the rationing of clothes, let us see the repercussions of the Purchase Tax on the present position. Those who had the cash available, as I indicated, bought very largely and substantially ahead, stocked their wardrobes very well indeed and, of course, escaped the Purchase Tax by that method. But that section of the community who could not afford it, who never had the current cash to spend a year or two years ahead on their clothing, footwear, hardware and domestic supplies, were unable to take advantage of this buying ahead. Now they are faced with the rationing of clothes and have to pay the Purchase Tax on the rationed clothes when they buy them, whereas those who bought ahead not only escaped the Purchase Tax, but are in a very favourable position with regard to the rationing of clothes. However, my contention concerns the indefensible injustice which this particular tax causes. The rationing of clothes is not the only subsequent measure which the Government were compelled to adopt to deal with the reduction of expenditure which they urged that the Purchase Tax was going to accomplish, but which, of course, it failed to do. Prior to the rationing of clothes, which represented the final and severe form of dealing with this problem, the Government had attempted to deal with this question by the limitation of supplies. The Limitation of Supplies Order, under which traders were rationed on their pre-war trade, was a severe curtailment of the amount of supplies that they were able to sell to the community.

It is a much more effective method of reducing consumption than the Purchase Tax.
Then, the Government have been compelled following this policy of economy in production, to introduce the Concentration of Industries Bill. If you take the limitation of supplies, the Concentration of Industries Bill, and the rationing of clothes, you have a much more effective and drastic measure, which shows how completely falsified was the argument about the Purchase Tax. Finally, the Chancellor is being driven to that position which I ventured to suggest when this matter was first debated in the first Budget of the war—that eventually we should be driven to establish the relationship between the Treasury and the individual citizen, that there was a certain figure which we needed to carry through this war, a certain amount of finance each year for the purpose of avoiding inflation, an objective which we are all determined to back up. There is no dispute in this Committee with regard to the main objective of Treasury policy. It is foolish to try to dismiss an argument on a matter such as this we are discussing under a smokescreen of that kind. We face the situation, when that figure is determined each year by the Chancellor of the Exchequer of how much he must collect in direct taxation from each individual, and it is significant that he has not had the resistance to the raising even of Income Tax that he has had on many other items.
The Government, secondly, must determine the amount of income, or the amount of food and goods, which the individual can consume, and the sooner we place that on a fair equitable rationing system instead of the irrational method we have followed so far, the better it will be for all concerned. The third point is to determine how much of the spending power of the community—or residue of the income of the community—shall go into investment. Until we get that position, inflation will always hover as the bogey in the background. In the last Budget the Chancellor was compelled to take a very substantial step in that direction. I very much welcome his last Budget as an indication of movement along those lines. That being the case, I would urge the Chancellor, as he is now being compelled to increase his policy of the control and stabilisation of prices—he mentioned that


in his Budget statement and we shall shortly be considering the Goods and Services (Price Control) Bill, which will be a further step in the right direction—that the Purchase Tax is out of step and contradictory to the other items in Government policy. In that £40,000,000 is involved; we should be well advised to put that point right, so that the Goods and Services (Price Control) Bill and the other Measures the Government are taking for stabilisation can now be put into the proper logical category. It is out of the question for the Chancellor to come forward with his price control and stabilisation when he has been the biggest offender in pushing up the prices of a vast range of goods. He should clothe himself in a white sheet and not have dirty patches on it.
The Purchase Tax also contradicts the main pressure which the Government have exercised on the whole community. The problem of man-power to-day is becoming; exceedingly acute in every business organisation, and to maintain the efficiency of your administration, as everybody knows now, is one of the most serious problems of management. It is really difficult for the 40,000 businesses that are the charging points of the Purchase Tax to meet all the Government pressure with regard to man-power and then find that the Government, because of this£40,000,000, insisting that they should retain personnel in their establishments which represents all the complexity of charging this account to their undertaking. Those who have had direct experience of the administration of the Treasury have had a continuous flow of instructions, modifications and requirements from the Inland Revenue Department, representing to-day a fairly substantial booklet of instructions and modifications in dealing with items under the Purchase Tax. I venture to suggest that we could start one or two munitions factories by the labour employed in wholesale businesses on this particular administrative side of the Purchase Tax. It appears to me that in whatever way I examine this proposal it can in no way be argued that it helps to win the war or assist the nation's effort. If I have taken rather a long time, I must apologise to the Committee. I think it is necessary that they should face these facts.

Mr. Woods: I think my hon. Friend the Member for East Ham, South (Mr. Barnes), has covered most of the points. I would like to emphasise the relationship which Government expenditure is increasingly assuming towards the community as a whole. My hon. Friend mentioned 50 per cent. I think that, directly and indirectly, that figure will soon be vastly exceeded, because this tax does not merely affect the rank and file consumer in respect to his relationship to the Government. It also affects Servicemen. One of the things which has increased Government expenditure recently —and quite obviously and necessarily increased it—is with regard to officers' uniform allowance. An increase has had to be made by the Government, and this is really an illustration of what takes place. The Government, by their action, increase costs, and then have to increase an allowance to cover that cost. Another illustration of how it works is provided by that section of the community such as old-age pensioners and recipients of relief. The Government have had to increase their allowances.
But, while they have increased the allowances, they have at the same time substantially increased the cost of living. These people are in a more unsatisfactory position, although our expenditure upon them is increased. The Clause relates to items which are just as necessary as food itself. In relation to food, the Government have adopted the absolutely sound policy of stabilising costs, even although it involves considerable expense. Then, for a mere £40,000,000, they upset the whole balance, and cause grievances which may be ignored by many of us here because we are in a favoured position and can buy in advance, but which will be felt by others who cannot do that.
Then there is the position of the trader himself. In the blitzed areas traders may lose the whole of their stocks. Then they have to go into the market, and the entire replacement of their stocks carries the Purchase Tax. Setting up in business again, they find themselves at a hopeless disadvantage compared to their fortunate competitors who have escaped the blitz. That is not just an item here and there; it is something which has happened in the great majority of our big cities. I appeal to the Chancellor to do something


which will put him right not only in regard to his white sheet, which has become so soiled, but also in the eyes of posterity. Some of the greatest political mistakes of the past have been in regard to taxation. We see windows still bricked up in old buildings. One asks for an explanation, and is told that once we had a Chancellor of the Exchequer in this country who was such a fathead that he did not recognise the value of light and fresh air, and so he taxed window space. We look upon that as a classical example of stupidity. Take the tax on newspapers. Sometimes, in going through old newspaper files, we may find a little rag of a newspaper, containing outstanding contributions, which are classics of English literature. Yet the circulation of the finest thought of that day was circumscribed by the stupidity of a Chancellor of the Exchequer, who said, "Here is a new thing; we will tax the Press" The most remarkable example of all is that of the riots because of the wheat tax. Now we are taxing the necessities of life: clothing, boots, bedding. These things are being put outside the purchasing power of a considerable number of our citizens because we want a few millions of pounds. Going through the expenditure of the Services with a fine-tooth comb, the Chancellor could save in a few months the £.40,000,000 which we are asking him to forego in the interests of decent treatment for a large section of the population of this country.

Mr. Broad: I wish to add my voice to the able speeches which have been made on this subject in an attempt to induce the Chancellor to modify this taxation, which is so drastic in its incidence upon those least able to bear it. The Clause does not relate to the Purchase Tax as a whole. There may be a good reason for applying the tax to luxury articles, which cannot very well be rationed and for which heavy prices are paid. The Clause proposes to remove from this form of taxation those articles which are necessary to the person or to the home if anything like a reasonable standard of health and decency is to exist. I remember what the Chancellor said when he adopted that ill-conceived proposal of his predecessor and then sought to apply it, without, I am afraid, giving it full consideration. He said that he would apply it to goods which were

luxury articles, or which, in the circumstances of war, we could either do without, or at least postpone replacing. It is true that the replacement of some of the goods in this list might be postponed for days or weeks, but, bearing in mind that only inferior kinds of domestic articles and clothing are within the reach of the masses of the people, such postponements cannot be continued for many months, and certainly not for years. These things are absolute necessities.
In this list we find remarkable items, such as the baby's feeding bottle, having to pay the tax. The Government take care that the children of poorer people can get milk either free or at a cheap rate, and then they put a tax on the bottle from which it is drawn. I know that the Chancellor said something about providing substitutes. I suppose he would suggest that perhaps a half-pint beer bottle or gin bottle with a teat should take the place of a proper feeding bottle. That would be quite in line with the lectures we have had in the past about how the poor mother can make a cradle for her baby from a banana crate. I heard it said yesterday, "It may be that blankets, or something to take the place of blankets, are a necessity." The Purchase Tax has increased the price of blankets by something like 12s. a pair. I well recollect that in those days, when anything was supposed to do for the poor, they were told that if they would only put their old clothes on the bed and a sheet of brown paper, they would find that they would be as warm as they would be if they had blankets. Are these the kind of substitutes that the Chancellor of the Exchequer has in mind? It is the same if you take these things right the way through. There are galvanised pails in the buying of which so many good citizens have indulged in order to place them outside their door full of water in case there should be any incendiary bombs about. And so one can go on through these things, every one of which is an absolute necessity in the homes of the people. Crockery, plates, cups and saucers, especially when there are small children about, are bound to get broken. Perhaps they will be expected to eat their fish and chips from off the paper in which it has been wrapped rather than have a plate, thus putting off buying a plate until after the war. This may sound rather absurd.


but all this is possible owing to the taxation at the moment.
As to the contention of the Chancellor of the Exchequer that this would lead to a necessary reduction in consumption of everything, surely this has now all been achieved by the rationing of clothing, the limitation of supplies, and, in some respects, by the fixation of prices. Mostly, however, these prices are fixed after a considerable rise has taken place, so as to make the goods easily accessible to people who have a sufficient margin of income but inaccessible to those on the lowest strata of wages. I think that it can be claimed that, as far as restricting consumption is concerned, an alternative and better method has been taken by the Government through other Departments such as the Board of Trade and the Ministry of Food. Attention has been drawn to the increase in the cost-of-food index of the Ministry of Labour, which in May of this year was 71 per cent. above that for the standard year of 1914. The cost-of-food index is also included in the cost-of-living index, which in May of this year was more than 100 per cent. above that for 1914. This very great increase has not wholly taken place in food, but a very large proportion of the increase is due to the taxation imposed by the Chancellor of the Exchequer. The cost-of-living index, badly weighted as it is against the interests of the wage-earner, is the basis of negotiations or the standard by which wage adjustments are made in many instances. Wages have had to go up largely as a result of the action of the Chancellor of the Exchequer in putting these unnecessary taxes upon the necessities of the people. As wages go up, the Government and the employers have to pay more for their labour. The Government themselves, I believe, have lost considerably more by what they have had to pay out in labour costs for food, commodities and munitions than has been made by this tax.
People realise that they have to suffer during war-time from a shortage of goods, but they very much object to anything in the way of profiteering. If there is anything that is likely to create unrest— and it is creating unrest—it is the enormous increase in prices of a great many commodities which are not price-

controlled because they are seasonal and so on, and which are now placed beyond the reach of ordinary people. They know full well that these increases in price are not due to the increased costs of production. Plenty of capitalists are already shaking their hands and objecting to paying excess taxation, and are saying, "What is the use of having a war unless you can get a profit out of it?" The leader in the game of profiteering is the Chancellor of the Exchequer, because by his Purchase Tax he has imposed on the price a charge which is not justified either by the cost of production or a reasonable amount of profit. Wherever there is an artificial price charged to the consumer and whether the result goes in excess profits of which the Chancellor of the Exchequer will take 80 per cent. or whether the whole of the excess goes to the Chancellor of the Exchequer, it is still profiteering and an unnecessary and unjustifiable raising of prices against the people. This sort of thing is bound to have its reactions in the demands which we are already seeing in industry, despite all the influence and advice and the urging of the leaders of various trade unions for a rise in wages as a result of the rise in the cost of living.

The Deputy-Chairman (Colonel Clifton Brown): I am sorry to have to interrupt the hon. Member, but he seems to be getting a little wide of the proposal which is now before the Committee.

Mr. Broad: I am endeavouring to show that by removing this tax on the necessaries of life the Chancellor would remove one of the great factors contributing to increased prices and leading to inflation. I will leave that for the time being. I think I have said it well enough. Increased prices for necessary articles of clothing and household usage will mean a lower standard of life for the poorer paid workers at a time of great stress and strain and arduous toil. That is bound to have its effect upon the point of view of the worker. I recall the story of the apprentice boy who was maintained by his employer and who was being goaded for working in a very lackadaisical way. The boy said, "It is like this, guv'nor: bread and cheese, you go as you please". The next day there was roast beef and plum pudding for dinner, and his "guv'nor" asked, "What have you to say this time?" He said, "Bread and


cheese, you go as you please. Roast beef and plum pudden, and you work like a goodun" And so with the Chancellor of the Exchequer, he is obtaining this kind of revenue for the Slate at the expense, in the main, of the poorer paid workers. The increase of prices, no matter whether it comes as a result of profiteering because of transport or whether it comes out of unfair taxation, has exactly the same effect as a fall in wages. When we know what a big proportion of people have been below a proper standard of existence economically we can realise what it means further to reduce their wages. If these people have any pluck, they will not put up with it, and, despite all the urges about equality of sacrifice, if they see what is going on at the other end of the scale, they will say, "We are not going to be the only ones to be sacrificed; we are going to have an increase of wages to meet the increased cost of living which is the result of the deliberate action of the Government through their Budget." The Chancellor of the Exchequer seems to be working in a watertight compartment.

Sir K. Wood: In a white sheet?

Mr. Broad: He is concerned only with income. He has no idea of relating his work to that done by other Departments. No matter how much you increase your income, if your expenditure as a result of that increased income goes up at a greater rate than ever, then bankruptcy stares you in the face. That bankruptcy will be measured by inflation, and the turning point in this inflation, which is bound to occur to a greater or lesser degree, will be recorded in history as the application of the Purchase Tax to the necessities of the life of the people. Immediately the war is over if the £ instead of looking the dollar in the face at the certain old-time ratio is at anything like parity or even 50 percent. of the dollar value, I shall be very much surprised, especially if the Government go on with the financial arrangements which were started with this wicked tax which was introduced last year. I must register my protest against this tax. I opposed it at the time. I know it was opposed by my friends of the then Opposition and was reluctantly accepted by them in the days when the Coalition was brought about. But I do not think its full implications have been

understood, and I am sure that if we had a free vote of the Committee to-day, without any fear of creating difficulty for the Government in their conduct of the war, there would not only be a unanimous vote on this side of the House, but a large number of Members on the other side of the House would join us in the Division Lobby.

Major Vyvyan Adams: It was interesting to hear the last speaker advance reasons for keeping down the standards of prices and at the same time give excuses for not raising the level of wages, so avoiding inflation. With that, I think, a great many Members of my own party will profoundly agree. I certainly agree with the hon. Member that there is the greatest danger of inflation before this country. I understand it is not to be the practice of the Government to discourage purchases so far as purchase is consistent with our gallant attempts at national solvency, which will get more and more difficult as the war proceeds. The number of coupons allowed to the individual for the purchase of clothes in every 12 months seems to me to prove that. It is not an extravagant or over-generous quantity, but I think that with a little sane management it will be found to be perfectly adequate.
The garments we have to wear may be deemed to be necessities, and before the Chancellor rejects this Clause I think he will have to prove to the Committee that there are no means available to him of making up the £40,000,000 which, I understand, he is likely to lose if he drops this tax on necessities. For my own part, I confess that I see a great deal of virtue in this Clause, because we are now dealing with the economics of siege warfare, and we have to put primary necessities first in our consideration of what is to be available for general purchase. Already it has been said, I understand, that the Purchase Tax yields in a financial year about £70,000,000 and that my right hon. Friend would be likely to lose about £40,000,000 if he dropped this tax on necessities—that is, if we accept the definition which is comprised in this new Clause. My right hon. Friend will have carefully to consider, if he is honestly to reject this Clause, whether he cannot recoup himself by raising the level of the Purchase Tax on other goods which can-


not be classified as necessities. I hope he will So that when he considers his reply. I think that a priori and prima facie there is a great deal to be said for this new Clause, when we consider the straits to which we shall all be put before long. Necessities must come first, and clearly that is wisely contemplated in this new Clause. On the other hand, if the Chancellor can show beyond any question that his financial stringencies are such that he cannot recoup himself, I should be the last to support this Clause to any length.

Sir Patrick Hannon: I hesitate to intervene at this point, but I think I must tell the Chancellor that there is some substance in the appeal which has been made to him from the other side of the House. Co-operative societies throughout the country have made continuous appeals to Members of this House to deal with the question of the incidence of the Purchase Tax in raising the price of the necessities of life. We Birmingham Members of Parliament, having a wide, statesmanlike outlook on public questions, invited representatives of the Co-operative societies to a meeting in Birmingham last week, at which quite a number of my hon. Friends of this House, including myself, representing Midland constituencies, met their representatives —

Mr. Hannah: We are not all Birmingham Members.

Sir P. Hannon: I know; I was including my hon. Friend, who is a distinguished Midland representative. The representatives of the Co-operative societies submitted to us information, with regard to the Purchase Tax raising the cost of articles essential in the domestic life of working people, that made a profound impression upon us. We were bound to pay attention to their figures, because the Birmingham Co-operative Society embraces a membership of 235,000 people. We have another large Co-operative society with a large membership, and, of course, the ordinary retail trade comes within the same category so far as the cost of living is concerned. If it be the fact that in the case of wool blankets the price to the consumer, with the Purchase Tax attached, has been raised since August, 1939, by 137 per cent. then I think a case has been established for consideration by

the Chancellor. No doubt the tables of figures handed to us at Birmingham have been submitted to the Chancellor, but on a series of items concerned with the domestic life of working-class people in the Midlands the increases through the Purchase Tax, have in my view, inflicted a considerably increased burden on some of the poorest in the land.

Mr. Barnes: Not the whole of that 137 per cent. increase is due to the Purchase Tax. The Purchase Tax has aggravated the increase and represents 12s. 6d. per pair of blankets.

Sir P. Hannon: I said it was due to the Purchase Tax plus the increased price of the commodity. Although I was an old agricultural co-operator in the golden days gone by, this does not merely affect Co-operative societies; it affects consumers as well. If it be the fact that the working-class population, who have enough difficulties to face from day to day and to whom we are appealing to make a supreme effort in the production of the munitions that will save us from disaster, are penalised in their household budgets to the extent of the figures that were submitted to my colleagues and me at the conference in Birmingham, then I appeal to the Chancellor to find some way of relieving them of the increased burden. It has been our great tradition in the House of Commons to administer equality and fair play to every interest in the land, and particularly we ought not to be a party to placing a heavy burden on the maintenance of domestic life and the bringing up of the families of the poorest people in the country. Let me give the Committee one case that was submitted to us. Twill sheets, which form part of the domestic equipment of every humble household, have been increased in price by 135 per cent., according to the figures that were given to us. If these increases, with the rising prices of commodities and the dangers of inflation, which have been referred to, are incidents in our present economic system, the sooner some measure is introduced to deal with them effectively and so relieve the mass of the people, the better it will be for the country. The last thing I want to do is to vote against my right hon. Friend the Chancellor of the Exchequer. He is the most amiable statesman of modern times.


He listens sympathetically to every representation that is made to him, he is always accessible, he is always kind; and if any body asked me to name some statesman of my acquaintance who was the embodiment of human charity, I would say it was the Chancellor. Let me give the Committee another illustration of the in crease that has taken place. Alarum clocks, which every workman in the country requires—

Mr. Magnay: They are quite unnecessary.

Sir P. Hannon: I suppose that on the Tyneside people are called in the morning. Alarum clocks have increased in price by no per cent. Why should a poor man who wants an alarum clock in order that he may get to work at the right time in the morning, have to pay such an increased price? The general principle involved is that, although we know the Chancellor's difficulties and sympathise with him in his supreme effort to get the necessary finance to carry us through our present terrible trial, so that we may put an end to barbarism and establish Christianity and the rule of law and order, we cannot at the same time place such a burden upon the poorest people in the land as is being placed upon them by this tax. I make this appeal to my right hon. Friend. I know that he will be kindly and gentle in his response, and if he refuses, we will take it kindly from him, although at the same time we shall feel in our hearts that he ought to have done something better for the mass of the people.

Mr. Salt: I want to add one point to that which was made by my hon. Friend the Member for Moseley (Sir P. Hannon). When the Purchase Tax was introduced, I think that most of us thought the higher rate would be imposed on luxury articles, but when we examined the particulars given to us by the Co-operative Society, it was obvious that clothing and other necessary articles were included in the 33⅓ per cent. tax. Does not the Chancellor consider that such things as blankets are absolute necessities which ought to be taxed on the lower level?

Sir K. Wood: I am very much indebted to hon. Members in all parts of the Committee for their personal concern for me. I gather that I stand here in a white sheet

and in a separate water-tight compartment, and in those grim circumstances I will do my best to reply to the Debate. I was surprised when my hon. Friend the Member for Yardley (Mr. Salt) revealed to us that he has not followed the previous proceedings on the Purchase Tax and has apparently heard now for the first time what are the provisions of the tax, which was the subject of considerable debate in the House. I am very surprised, knowing so well the complete attention which he gives to his Parliamentary duties, that he has forgotten those former proceedings.
I make that observation because I want to recall to the Committee all that I have endeavoured to do to meet hon. Members in the difficult situation which confronted me. The Committee will remember that when I came to my present office, I had under consideration the question of the Purchase Tax and the Bill which, I think, had already been presented to the House. Hon. Members opposite came to me, and at that time I endeavoured to make a number of concessions, at considerable expense to the Revenue, in order to meet the situation as it then was. Those con cessions, which represented a considerable sacrifice, amounted to very many million pounds. With the assent of the House, I exempted from the Purchase Tax foot wear and clothing for children, and similar articles, and I also made a very substantial alteration by putting the tax in two categories. By these means I endeavoured to mitigate the effects of the tax and as far as possible to meet hon. Members opposite. The result was that the House approved of the Bill by considerable majorities. Hon. Members opposite who belong to the Co-operative societies stated that opposition then, as they have done to-day, and I say again that I understand their special position in this matter, and the reasons which animate them to state their points. Of course, I cannot for one moment object to any of the statements that have been made, particularly by the hon. Member opposite, who has so often, in the course of the discussions on this matter, made very able and considered statements on the whole position. I do not quarrel with what he has said from his point of view —

Captain Strickland: Will my right hon. Friend indicate to the Committee the concessions he has made under the Purchase


Tax with regard to special household commodities such as sheets, and will he also tell the Committee what are his views regarding this matter—a Purchase Tax of 33⅓s Per cent. is placed on goods in one year, and in the course of three years, as the price of the goods rises, the Purchase Tax goes up three-fold, with the result that it is really a tax of 100 per cent. on the original price?

Sir K. Wood: I had better reply to what my hon. and gallant Friend has said by referring him to the discussions which have taken place. Hon. Members will have good memories on this matter, and I know that they will do me the justice of remembering that I deleted from the Bill a considerable number of articles to which they objected. It is true—and we have to face this fact—that a number of items were left in, and are subject to the tax; and nothing that I can say today will remove those articles from the tax at the present time. My position is plain. It was not for the fun of the thing, or because I like imposing taxation on people, that the Purchase Tax came into being. Anyone who recalls the Debates on this subject will remember the reasons I gave for imposing this taxation, as I have to impose any other taxation. I am amazed at some of the statements that have been made in this Debate. Anybody would think that we are in a happy position as far as our financial affairs are concerned; anybody would think that everything in the garden is lovely. The financial position of this country must give everybody, myself included, a considerable amount of anxiety.
I must ask hon. Members to have regard to the whole position and not to get up and say, as they have done today, that they would very much like this, that and the other thing to be done. I wish it were possible to do these things. But how can I possibly give up a considerable sum of revenue at the present time? I should be doing the greatest disservice to the very people for whom my hon. Friends purport to speak. Those who would suffer the most if we allowed our finances to run riot would be the humblest people, and, for the want of a better phrase, those in the lowest walks of life.
I am bound to maintain every possible item of revenue I can, in view of the position I revealed to the House in my Budget

statement. No one would endeavour to prophesy, but from the financial point of view, and from the point of view of wisdom and foresight, I have to contemplate that we are engaged in a long war. How can anyone ask me to give up what has been referred to to-day as the sum of £40,000,000 of revenue? If I had £40,000,000 in hand it could be used in very many ways, not only for war purposes, but for many other purposes. But I have not got it, and anyone can see from my Budget statement that I have had to look around and impose the heaviest taxation on rich and poor alike. I am certainly not in a position to-day to make a sacrifice of this kind. One of the difficulties which may confront me in the future when I again have to look around is where I am to look for further financial assistance. That is going to be the difficulty of the future. My hon. Friends should put themselves in my place with the thought that the war may last for a considerable period. Let them think when they go home from which direction any further financial aid might come. It is under these circumstances, and on these grounds alone, that I cannot, however much I should like to do so—and I feel the weight of the criticisms that have been made—give up this source of revenue.

Mr. Lipson: Has the Chancellor made an estimate of the effect of this tax on wages? In view of the fact that the Government are the chief spenders, and therefore chiefly affected, if it is resulting in an increase in wages, does that not tend to bring that inflationary movement, which the Chancellor naturally dreads, and which, as he said, if it gets out of control would inflict great hardship on the poorest section of the community?

Sir K. Wood: If that has taken place, there are ways of dealing with it, not by giving up the tax, but by other means. So far as the merits of the Clause are concerned, hon. Members will realise that if it was carried, it would not mean remitting the tax only on the cheaper types of clothing, but also on other clothing which may well be described as luxuries. It is not the fault of the Mover of the Clause, because he cannot alter it—it is dealt with in the Bill in this form. However, I take my stand broadly on what I have just said to the Committee. I hope they will


not think I am discourteous if I do not answer all the points which have been raised, but I feel that what I have said ought to be said. I quite understand the special case of the hon. Members opposite, but I must look to Members of this House to support me in the difficult financial position which faces us to-day.

Mr. Pethick-Lawrence: I have a considerable sympathy with my hon. Friends who put down this Clause. The origin of this tax was far from above suspicion. For some time before it was introduced there was a large body of opinion in the country, represented by some Members— and I will put it no higher than that—who wanted what they called a broadening of the basis of taxation, and by that means to transfer the burden from those who had plenty to those who had very little. The Chancellor's predecessor, Lord Simon, showed his support of that idea at the beginning by imposing an extra tax on sugar. That imposition was bitterly resented on these benches, and it was realised by some of us as being a thoroughly bad policy as well as fin unsocial action. The Purchase Tax, as it was originally produced by Lord Simon, was, in my view, a thoroughly bad tax. In the first place, it was on a flat rate, and in the second place it flouted the House of Commons by not allowing the House to decide what the amount should be. In the third place—and this appealed very much to me and to many of my hon. Friends—it was not accompanied by any large increase in direct taxation. It was a purely one-sided burden thrown mainly upon the poorer section of the population, and it seemed to me to offend against my ideas of what war-time taxation ought to be.
The tax, having started off in that way, was strongly opposed on these benches, and I made strong speeches against it. I have no doubt that if we were living in ordinary times and acting under the ordinary conditions of party warfare, we should still be fighting against this tax in every form and demanding its repeal. The repeal of this tax is the effect of this Clause. I expect that in other quarters of the Committee there would be an equally strong demand for a repeal of the heaviest forms of Surtax and the other burdens which fall on the direct taxpayer. We all know that we are not living in ordinary times. We are living in the

stringent times of war, and we are also living at a time when the thoughts of people are not for party but for State. We are living at a time when every section of the community is making some sacrifice, and some of them are very severe sacrifices, in order to further our common end. It is in the light of these facts that the Chancellor has acted and we have acted in this regard. We have to consider this Purchase Tax not as an isolated item of taxation which inflicts harm upon those people who have to meet it, but as part of the general finances of the country.
Let us consider first of all how the Chancellor acted after he came into office. In the first place, he very considerably modified the character of the Purchase Tax itself. He decided that Parliament should have the say as to what the rate of tax should be and he made the step in the tax which brought about the two columns which are referred to in the proposed new Clause, endeavouring thereby, as far as is possible in a tax of this kind, to reduce the tax upon necessaries. I know it has not been done completely, and I think the Chancellor would agree with that view but, in so far as it was possible, he aimed at that and to a large extent he succeeded. Further, he cut out altogether the things which it seemed to some of us would press hardest on the poorest of the population. But that was not all. At the same time that he brought forward the tax in its amended form he brought forward a considerable increase in direct taxation, and thereby restored the balance which I thought at the time his predecessor had departed from in his original proposal in the Budget of April, 1940. Those two things induced the majority of us on these benches, rather reluctantly, but definitely, to give the Chancellor support in his Budget of, I think, July, 1940. But my hon. Friends who are asking for this Clause are objecting to the tax on the ground that it does exactly what the Government's policy is designed not to do, to raise the cost of living, and thereby to start a vicious spiral of rising prices and costs which, as we know from the experience of the last war, was a thoroughly bad thing to do. The Government's policy of finance consists partly in taxation and partly in subsidising the necessaries of life. I think the Chancellor has done far more on the side of keeping down a rise in the cost


of living than the Purchase Tax has done on the other side.

Mr. Barnes: Will my right hon. Friend address his mind to the point that the President of the Board of Trade fixed the £3 a week family as a kind of standard and that the Purchase Tax put 2s. 6d. a week on the expenses of such a family?

Mr. Pethick-Lawrence: I cannot say "Yes" or "No" to a statistical statement of that kind. I should have thought that it was a very great exaggeration, but I cannot obviously check it or refute it in the course of a speech. But the relief which the Chancellor gives at present to the standard of living by subsidies is of far greater importance to the poorer sections of the community than what I should have thought is the comparatively small injury which is effected by the Purchase Tax. I have to bear that in mind. If you were to say the Chancellor of the Exchequer ought not to interfere in the matter of the cost of articles, and he were to respond and say, "I will take off the Purchase Tax and take off all the subsidies which I am giving to keep down the cost of living," I am sure there is not a

Division No. 19.]
AYES.



Broad, F. A.
Maclean, N.
Smith, E. (Stoke)


Chater, D.
Maxton, J.
Watson, W. McL.


Daggar, G.
Morrison, R. C. (Tottenham, N.)
Wilson, C. H. (Attercliffe)


Dugdale, Captain John (W. Bromwich)
Ritson, J.



Gallacher, W.
Silverman, S. S.
TELLERS FOR THE AYES.—


Leonard, W.
Sloan, A.
Mr. Barnes and Mr. Woods




NOES.


Adams, Major S. V. T. (Leeds, W.)
Crookshank, Capt. Rt. Hon. H. F. C.
Griffiths, J. (Llanelly)


Adamson, W. M. (Cannock)
Crowder, J. F. E.
Grimston, R. V.


Albery, Sir Irving
Culverwell, C. T.
Hambro, A. V.


Aske, Sir R. W.
Davidson, Viscountess (H'm'l H'mst'd)
Hannon, Sir P. J. H.


Balfour, G. (Hampstead)
Davies, Clement (Montgomery)
Harland, H. P.


Beamish, Rear-Admiral T. P.
Davies, Major Sir G. F. (Yeovil)
Harris, Rt. Hon. Sir P. A.


Bellenger, F. J.
De la Bère, R.
Hewlett, T. H.


Benson, G.
Denville, Alfred
Holdsworth, H.


Berry, Capt. Hon. J. S.
Dobbie, W.
Hollins, A. (Hanley)


Bird, Sir R. B.
Doland, G. F.
Holmes, J. S.


Blair, Sir R.
Duckworth, Arthur (Shrewsbury)
Howitt, Dr. A. B.


Boulton, W. W.
Dugdale, Major T. L. (Richmond)
Hudson, Rt. Hon. R. S. (Southport)


Bower, Comdr. R. T.
Ellis, Sir G.
Hughes, Moelwyn


Brabner, R. A.
Elliston, Captain G. S.
Hume, Sir G. H.


Brocklebank, Sir C. E. R.
Emery, J. F.
Hurd, Sir P. A.


Brooke, H.
Emrys-Evans, P. V.
James, Wing-Comdr. A. W. H.


Cadogan, Major Sir E.
Erskine Hill, A. G.
Jarvis, Sir J. J.


Campbell, Sir E. T.
Evans, Colonel A. (Cardiff, S.)
Jeffreys, Gen. Sir G. D.


Carver, Major W. H.
Evans, E. (Univ. of Wales)
Jenkins, Sir W. (Neath)


Cary, R. A.
Fildes, Sir H.
Jennings, R.


Cazalet, Thelma (Islington, E.)
Fremantle, Sir F. E.
Jewson, P. W.


Channon, H.
Gammans, L. D.
John, W.


Clarry, Sir Reginald
Gates, Lieut. E. E.
Jones, Sir G. W. H. (S'k Newington)


Cluse, W. S.
Goldie, N. B.
Jowitt, Rt. Hon. Sir W. A.


Cobb, Captain E. C.
Graham, Captain A. C. (Wirral)
Keeling, E. H.


Colman, N. C. D.
Greenwood, Rt. Hon. A.
Kerr, Sir John Graham (Scottish U's)


Cooke, J. D. (Hammersmith, S.)
Gretton, Col. Rt Hon. J.
King-Hall, Commander W. S. R.


Craven-Ellis, W.
Gridley, Sir A. B.
Kirby, B. V.

Member who is concerned with the life of the poorer sections of our population who would exchange for a moment the present position for the position which that alteration would bring about. Therefore, looking at the Purchase Tax, not by itself, but in conjunction with the whole financial picture which the Government are concerned in painting for us since the war began, if the Chancellor says, "In view of the financial position I cannot take this tax off at present," I do not feel that we ought to go against that position. I am authorised by those who sit behind me to say that, much as we dislike the principle of the Purchase Tax, and though we hold ourselves entirely free when the war comes to an end to demand its immediate repeal, so that what has been introduced as a purely war-time measure shall not go forward into the peace world after that, as the Chancellor finds himself unable to meet this Clause, they, with me, will support the Government if the matter is pressed to a Division.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 15; Noes, 162.

Lamb, Sir J. Q.
Radford, E. A.
Stuart, Rt. Hn. J. (Moray and Nairn)


Liddall, W. S.
Rankin, Sir R.
Sutcliffe, H.


Lipson, D. L.
Rathbone, Beatrice F. (Bodmin)
Tate, Mavis C.


Little, Dr. J. (Down)
Rathbone, Eleanor (English Univ's.)
Thomas, J. P. L. (Hereford)


Lloyd, Major E. G. R. (Renfrew, E.)
Reed, Sir H. S. (Aylesbury)
Thomas, Dr. W. S. Russell (S'th'm'tn)


Locker-Lampson, Commander O. S.
Reid, W. Allan (Derby)
Tomlinson, G.


Loftus, P. C.
Rickards, Q. W.
Touche, G. C.


Macdonald, G. (Ince)
Ridley, G.
Tufnell, Lieut.-Comdr. R. L.


McEwen, Capt. J. H. F.
Robertson, D. (Streatham)
Wakefield, W. W.


McKie, J. H.
Ross Taylor, W. (Woodbridge)
Walker, J.


Magnay, T.
Rowlands, G
Ward, Col. Sir A. L. (Hill)


Maitland, Sir A.
Royds, Admiral Sir P. M. R.
Ward, Irene M. B. (Wallsend)


Makins, Brig.-Gen. Sir E.
Russell, Sir A. (Tynemouth)
Wardlaw-Milne, Sir J. S.


Mayhew, LI.-Col. J.
Salt, E. W.
Webbe, Sir W. Harold


Mellor, Sir J. S. P. (Tamworth)
Samuel, M. R. A.
Wells, Sir S. Richard


Moors, Lieut.-Col. Sir T. C. R.
Sanderson, Sir F. B.
Whiteley, W. (Blaydon)


Naylor, T. E.
Savory, Professor D. L.
Wickham, Lt.-Col. E. T. R.


Nunn, W.
Scott, Donald (Wansbeck)
Williams, C. (Torquay)


O'Neill, Rt. Hon. Sir H.
Scott, Lord William (Ro'b'h&amp;Selk'k)
Williams, Sir H. G. (Croydon, S.)


Owen, Major G.
Silkin, L.
Williams, T. (Don Valley)


Peters, Dr. S. J.
Simmonds, O. E.
Windsor-dive, Lt.-Col. G.


Pethick-Lawrence, Rt. Hon. F. W.
Smith, Bon (Rotherhithe)
Wood, Rt. Hon. Sir K. (W'lwich, W.)


Peto, Captain B. A. J.
Smith, Rt. Hon. H. 6. Lees- (K'ly)
Wootton-Davies, J. H.


Pickthern, K. W. M.
Smith, T. (Normanton)
Young, A. S. L. (Partick)


Price, M. P.
Southby, Comd. Sir A. R. J.



Profumo, J. D.
Spens, W. P.
TELLERS FOR THE NOES.—


Pym, L. R.
Strickland, Capt. W. F.
Mr. Munro and Major Sir


Quibell, D. J. K.
Stuart, Lord C. Crichton- (Northwich)
James Edmondson.

NEW CLAUSE.—(Further amendment of Purchase Tax.)

The Seventh Schedule to the Finance (No. 2)Act, 1940 (relating to Purchase Tax) shall be amended by deleting paragraph 2—[Mr. Woods.)

Brought up, and read the First time.

Mr. Woods: I beg to move, "That the Clause be read a Second time."
The discussion on the previous Clause showed that there had been a misunderstanding in the Committee. When the Purchase Tax was being discussed in principle a concession was made that necessaries should be subject to a reduced tax of 16 2–3rds per cent. When it was finally introduced it was found that there was one class of necessaries which remained in the first column of the Schedule and was subject to 33 1–3rd per cent. tax. Paragraph (2) of the Seventh Schedule, which I am moving to delete by this new Clause, includes these necessaries and covers
tissues and fabrics (other than jute fabric), whether in the piece, shaped or partly made up, except as specified in the third column. Oil baize, oil cloth, leather cloth. Textile articles of a kind used for domestic purposes, soft furnishings and bedding, and travelling rugs.
There are various other items, including all kinds of floor covering. It was rather interesting to hear the misunderstanding that was shown in the discussion on the last proposed new Clause. Blankets figured in the discussion, and the assumption in the minds of those taking part was that blankets were subject to only 16⅔ per

cent. They are, in fact, subject to 33⅓ per cent. Replacement, therefore, costs at least one-third as much as it should, and with the rising price of blankets they are outside the means of many people. We had a discussion on the question whether a person with a number of small children can afford to buy ready-made articles, and it was shown that he is compelled to purchase material and make up the small garments necessary for children. Although some sympathy was expressed it was argued that it was cheaper to buy ready-made articles, but subsequent events have proved that to be erroneous. Some of those articles if purchased are free of tax, and others of them carry a tax of 16⅔per cent. but the industrious mother who purchases material in lengths and makes up the clothing has to pay 33⅔ per cent. That is quite inequitable. Twill sheets were mentioned. Had the last proposed new Clause been adopted twill sheets would not have been cut out, because they would have remained in the first column carrying 33⅔per cent. tax.
The number of things which are essential in every home if any standard of decency is to be maintained which are subject to the 33⅔ per cent. tax is remarkable. The cheapest kind of floor covering procurable carries 33⅔ per cent. and bedding of all kinds including the very cheapest. After the experience we have had of this tax and the sufferings of the people in war-time, I suggest that if this Clause cannot be accepted the least the Treasury can do will be to introduce some


consistency into the operations of the tax by removing these necessaries from the first column and putting them with the other necessaries of life which carry only 16⅔ per cent. tax. That would be a concession. My Clause is based on the sound principle that all the necessaries of life should be free from this tax, and I cannot understand why one class of commodities vitally necessary for the maintenance of life, let alone a standard of decency, should have to carry a duty of 16⅔ per cent. At the same time a lot of goods which are of no material or moral worth to the community, and which we indulge in merely from habit and tradition, are chargeable at the rate of only 16⅔per cent. Why a bottle of scent should carry no more tax than a bed I cannot understand.
I appeal to the Chancellor and the Financial Secretary to regard my new Clause as a reasonable and logical proposal, and in the last analysis as a human proposal. The constituency which I represent lies in the very heart of London. A number of wards have been blasted out of existence. As I go through the streets of what was a part of dear old London and see row after row of stark ruins I realise that practically all the furnishings of those houses, all the bedding and blankets as well as clothing, have gone. Those people have been asked to carry a far heavier burden than has fallen upon the bulk of us, and they have borne that burden. They have been blasted out of their homes and have lost the very elements of a furnished habitation.

The Deputy-Chairman: I must ask the hon. Member not to anticipate the new Clause in the name of the hon. Member for Stoke (Mr. Ellis Smith).

Mr. Woods: I apologise if I am impinging upon another Clause, but I am putting forward a perfectly sound case for my Clause. These people are without the means of securing rest and sleep. They have to replace beds, and if they can get a blanket, it is of inferior quality and at a high price, and on top of that high price they must pay 33⅓ per cent. tax. I ask that my proposal should not be looked at only from the Treasury point of view. The amount of money involved here is infinitesimal compared with the vast expenditure which is now going on and the opportunities there are for economy.

Captain Crookshank: I do not want to reopen the discussion we had on the last new Clause, which really covered the general field, and shall devote myself purely to what is involved in this Clause. As the hon. Member has pointed out, his Clause would remove from the list not only tissues and fabrics but also various textile articles of domestic use— soft furnishings, bedding, carpets and other floor coverings, and the like. When he says that to remove this range of articles from the scope of the Purchase Tax would mean the sacrifice by the Treasury of only an infinitesimal sum, he is using language which is not quite accurate, because it is estimated that the goods dealt with by this Clause will bring in to the Treasury something like £11,000,000 or £12,000,000 and if clothing were also exempted, it would mean a loss of something like another £20,000,000 making a total of between £31,000,000 and £32,000,000.

Mr. Woods: We are not really asking that those articles which because of their high price could be regarded as luxuries should come out. I was basing my argument on the articles included in the list which are common necessaries of life. That was the whole of my argument.

Captain Crookshank: That may be relevant as a consideration, but I am dealing with the hon. Member's Clause and with the general structure of the Purchase Tax. As was made clear at the time, it was never intended to be a luxury tax but was a tax on the whole range of articles and materials. The effect of this Clause would be a loss of £31,000,000 to £32,000,000 to the Exchequer, and that is exactly what the Chancellor was saying just now he could not ask the Committee to agree to. I think that is really a sufficient answer to the hon. Member's case, in view of the general Debate we have already had, but I would add this in reply to his argument that this concession is all the more necessary because people have had their homes bombed and are faced with difficulties in replacing their goods. I think he must have overlooked the point that since the Purchase Tax was introduced we have passed the War Damage Act, which very much alters the position for anyone who has lost the necessities of life. I am not going into all the arrangements which are open to


people who have lost their property as a result of enemy action. In addition to the long-distance compensation which is corning to them, there are also provisions under which they can get immediate assistance from various sources to enable them to replace necessary articles— clothing, bedding, furniture and the rest. That immediate compensation is given to them on the basis of current replacement prices, and takes into account that the Purchase Tax is in the replacement price. To that extent, of course, the situation is different from what it was when we had the main discussions on the general proposals a year ago. I hope therefore, in view of the grave loss of revenue which is involved in this proposal and the fact that the actual point which he brought up has been covered in a quite different direction, that he will not think it necessary to divide the Committee on this occasion.

Sir I. Albery: May I ask my right hon. and gallant Friend one question about a matter on which I am not quite clear? I understood him to say that compensation was based on replacement value. I take it that that does not apply to insurance. If it does, I should really like to know.

Captain Crookshank: I am not talking about general war damage, which would be out of order. There are arrangements by which persons who are bombed out, and who ought to have replacements of necessities at once, can obtain them from the Assistance Board and various organisations. This is another subject from the general insurance. If persons have no coat, trousers or sheets, they have to have them, but they are not given these necessities in kind. They are given cash payments for the purpose, and what the payment is must, of course, be conditioned by the necessities which they require. This deals only with necessities, of course, but that was the point which the hon. Gentleman made.

Mr. Woods: I am not at all satisfied with the argument of the right hon. and gallant Gentleman, which seems to be that, once again, the Government find themselves faced with increases, and have to provide allowances to meet the cost of the increases, and so you go round and round the rugged rocks, which is a very annoying process. One of the few things exempt—and it interests the working class

very much—is heavy industrial canvas. It is exempt altogether. In the last analysis, when we get into sackcloth and ashes, we shall be exempt, but not until we do arrive at that stage. I am only asking that there should be an intermediate stage, and that, in the light of experience, the right hon. and gallant Gentleman will look into this matter. It is very difficult to draft an Amendment to segregate things. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Exemption from Purchase Tax of certain goods.)

Arrangements shall be made by the Commissioners to exempt from the Purchase Tax—

(1)goods purchased by each person up to a maximum of twenty pounds for each financial year;
(2)goods purchased to replace losses through enemy action. —[Mr. E. Smith.]

Brought up, and read the First time.

Mr. Ellis Smith (Stoke): I beg to move, "That the Clause be read a Second time."
I am sorry that circumstances may make it difficult for me to obtain support, which might otherwise have been forthcoming, for this reasonable proposal, and which, I think, would have been sufficient to enable it to be carried. A number of lion. Members have said that they regretted they could not be present because of meetings taking place in various other parts of the House. Upon a proposal of this character it is unfortunate. The Clause which was last dealt with settled the principle of the Purchase Tax, and the principle is not at stake at this stage of the discussion. The proposed new Clause raises two aspects of the administration of the principle. A number of hon. Members have had Questions upon the Paper in which they have appealed to the Chancellor of the Exchequer to do something of this character, and I hope they will support my proposal. If the Chancellor is not prepared to give way, I hope that those hon. Members will back their Questions to the logical conclusion and will support the proposed new Clause in the Division Lobby.
When first this proposal appeared upon the Amendment Paper, hon. Members in several parts of the House said they did


certainly support it if it were administratively possible. I immediately said: "This is being done in Germany." Anyone who has followed the publications of the Royal Economic Society, and the articles which have appeared in its journal, will have noticed how the Germans have managed their economy. Fortunately, we now have in this country what some of us thought ought to be introduced a long time ago, namely, we are gradually working towards a comprehensive financial policy, and, as a contribution to it, the coupon rationing system has recently been introduced. This system has simplified the administration proposed in the new Clause, and therefore the difficulties of administration have been cut out entirely.
I agree that in war-time, and especially with modern war, it is necessary to restrict consumption as far as possible. I also agree that it is necessary to cut out luxury consumption in every possible way, but many people can only afford bare necessities, particularly the people for whom I speak—and I desire to speak only for them. There are replacements which these people must have from time to time. The proposed new Clause is very restricted and is most reasonable. It is designed to meet the needs of the people with whom we are closely associated. Ministers and others defended the imposition of this tax on the ground that it was a levy upon luxury purchases, but, as I walk round Knightsbridge and the big stores in Manchester, London and other centres, I am forced to ask the Financial Secretary to the Treasury whether the tax has resulted in fewer luxuries being purchased.
I can answer for the ordinary people. I know the effect which the tax has had upon them, and my knowledge is borne out by statistical evidence that has been provided for us. It is estimated that it costs the average family 2s. 6d. per week, when the full effect of the tax is felt. I will give a few examples of the effects that cannot be calculated. I should like lion. Members to listen to this evidence. It comes direct from the homes of the people. It is a common practice among ordinary people to buy piece goods, on which they have to pay Purchase Tax. In order to carry out their domestic affairs as economically as possible, they

have to make up the piece goods into dress, costume or coat. On goes the Purchase Tax again. It has been the custom to buy hat and coat together for young children. When a friend of mine lost all he possessed a few months ago in an air raid, he had to fix up his children with clothes, which are not subject to Purchase Tax, but he could no longer buy hat and coat together, because the hat is now classed as millinery; and on goes the Purchase Tax.
The £20 contained in the proposed new Clause is a calculation of my own. I consider it the minimum reasonable figure to put down. Since the proposal has been on the Paper I have read once again the Ministry of Labour's investigation into weekly expenditure in working-class households, and I find that my figure is confirmed by that report. The report states that the average family should be allowed approximately £75 a year, free of Purchase Tax, for replacements alone. Our proposal is reasonable; it would allow a family of three people £60 per year.
I will give a few examples of the increases due to the tax, and I ask hon. Members to remember them, when considering the matter. It: states in this report— and these words are similar to those used by the financial advisers to the Treasury — that the smaller a person's income the greater is the proportion spent upon consumption. I hope that the right hon. and gallant Gentleman will be good enough to listen to this argument, because it applies most particularly to us in the industrial centres. "The smaller a person's income, the greater proportion is spent upon consumption." If that is acceptable, it logically means that this tax hits the poorer people harder than any others, and here are a few examples of how wholesale prices—not retail prices— have gone up as a result of the Purchase Tax alone, not through any other costs having been added to them: Shoes 2s. 8d. per pair; hats, 2s.; a yard of casement curtaining, 8d.; a yard of winceyette—which means so much to the ordinary woman—3d. per yard; rayon, 8d.; a dozen cups and saucers, 2s.
The Financial Secretary says that under the war damage provisions people can go to the Assistance Board and make claims for losses they have sustained. I attended a meeting recently where strong indignation was expressed as a result of


experiences of this kind. Fifty of the men represented there had lost the whole of their tools, in a certain area which shall not be mentioned, and the Financial Secretary should have heard the indignation expressed at the way these men have been treated—how the value of these tools was put right at the very minimum so that third-class tools had to be purchased. This is evidence of the effect upon our people of the way in which this is administered. We say there is only one right way to deal with this, and that is to make it perfectly clear to the people of this country that every purchase made under£60 per year per individual will be free of Purchase Tax. Remember there is always a lot of wrangling when compensation is being claimed, for people are sent to investigate who are well experienced and have great confidence, but when our people go before them they lack experience in dealing with public officials and public affairs. They are accustomed to putting down minimum figures and are not: used to business transactions in which it is necessary to add a few pounds in order to be certain of getting what you want. If, therefore, a person is bombed out and receives £50 compensation, as a result of this tax he can buy furniture and clothing to the value of only £37 10s. to replace what he has lost.
Throughout their lives our people have had a struggle to put together the homes they are proud of. They like to maintain their standard as far as possible, and even in war-time, from the point of view of maintaining their moral, we ought to do everything we possibly can to be sympathetic towards people who find themselves in such circumstances. They have nothing to play with, all their eggs are in one basket, and if they are not getting an income from the husband who is working, or if they lose their all, they have no bank balances to draw upon, no cheques to write. They can only just manage, and their purchases are, in the main, for replacements and should not be classed with luxuries as they are in a Purchase Tax of this kind.
In regard to replacements that have to be made as a result of loss through enemy action, the facts speak for themselves. I want it to be made quite clear that I am not now speaking critically of the people of this country. Generally speaking, it is the industrial centres and the seaports

which have suffered most severely as a result of enemy action. The people in those areas are not complaining, because they realise that it is the result of modern war, but we in this Committee ought to be most careful that we do not place unfair or unnecessary burdens upon them. Some hon. Members may think there is not as much in this as I am trying to say. If they do, let us go out of our way to make it clear to these people that we want to deal with them as sympathetically as we possibly can, and make it quite clear that in circumstances of the kind I have described the Purchase Tax will not be applied to them.

Mr. Chater: I desire to support the remarks made by my hon. Friend who has just sat down. In the second paragraph it has been found necessary that this Clause shall be substituted for one which stood in the name of myself and other of my hon. Friends. The second part refers to the exemption from Purchase Tax of purchases made by those persons who have suffered damage in their homes by enemy action. It seems to me that such a proposition must certainly commend itself to every hon. Member of this Committee. If the Members of His Majesty's Government could have had the experience, or would take the opportunity to gain the experience, of travelling through working-class areas for at least 15 miles around this great metropolis, and interviewing the families who have been bombed or burnt out, they would, like me, have had the experience of meeting families who, after a night raid, found themselves dispossessed of everything they had in the world. Such a family, on some very meagre allowance from the public assistance committee, have to go and make a few miserable purchases, just sufficient to enable them to live in a very minimum, not of comfort, but of discomfort. From people such as this a certain proportion of what they have received from the public assistance committee, in order to provide a few miserable sticks of furniture, is to be taken in the shape of Purchase Tax.
It is all very well for the Chancellor to say that a certain recompense will be made under the War Damage Act in days to come, or that some allowance is made now out of public funds for immediate assistance. But what is the real position?


Suppose a person goes to the assistance committee and receives£5 for immediate necessities. I think IF would be generally agreed that that sum would buy another 25s. worth of commodities if there were no Purchase Tax, and therefore, in effect, the Chancellor and the Government are drawing revenue from the very disasters that overtake these people as a result of the war. I cannot help feeling that no arrangement which was entered into between parties in this House at the moment when this Bill was going through, or even at the time of its inception, should interfere with the freedom of Members of Parliament of any party, who discover certain injustices in the operation of a certain tax which could not Have been foreseen at the time the Bill was going through the House, to try and remedy grievances of that description. I want to insist as emphatically as I can that even if this Clause is taken to a Division, no one has the right to claim that that means disloyalty to the National Government or to any of our comrades who have left this side of the House an3 now sit on the other. It is the common right of every Member of Parliament to try and remedy a grievance, and if by any political arrangement whatever, we are to be barred from trying to bring these grievances to the notice of Parliament we have become mere automatons instead of Members of Parliament. Therefore I appeal on grounds of humanity, on grounds of justice, and on the ground that here is a grievance, not foreseen, which there is now an opportunity to remedy, that this Clause should be accepted by the Government.

Captain Crookshank: No one agrees more than I do with the hon. Gentleman in saying that the job of Parliament is to remedy grievances. We have our different ways of dealing with these problems. This Clause covers two quite different aspects. He wishes arrangements to be made whereby everybody should be exempted from Purchase Tax for goods purchased to a maximum of £20 a year. The second proposition is that people should be exempted from Purchase Tax on anything which they have to replace due to losses through enemy action. That is quite another matter. Let me take his first proposition, that everyone should be exempted for goods purchased up to a maximum of £20. Leaving aside for a

moment the general issue of the Purchase Tax, which we discussed on the last two Clauses—that we cannot afford now to have any relief from that burden at the present time—let us look at the proposition from the point of view of its practicability. How in the world could it be carried out under the existing structure of the Purchase Tax? Exemption is asked from a tax which already exists? There are two rates, the full rate and the half-rate, and there are goods which are not taxed at all. The hon. Member made no reference to how any scheme could be worked out to meet his proposition.

Mr. E. Smith: I am sorry I did not deal with that. I did not expect the matter to be raised in this way. The coupon system has now been introduced. What is to prevent the Commissioners from making arrangements so that people, by making application, could have £20 of coupons which they could place before those from whom they were purchasing goods and, to that extent, their purchases would be free of Purchase Tax?

Captain Crookshank: That suggestion certainly requires a great deal of exploration, because coupons are applied only to clothes at the moment. The hon. Member's proposition is not limited to clothes, but covers everything. If we envisage coupons for everything in order to deal with this problem, the hon. Gentleman is really asking us to undertake a perfectly fantastic administrative task. I think if he reflects upon it he will see that that is so.
On the other point about the exemption from Purchase Tax for goods purchased to replace losses due to enemy action, I have already pointed out just now that the difficulty of immediate replacement of necessities has been met by the War Damage Act, and the arrangements which have been made for immediate payment, with regard to the general replacement of property, furniture and other goods, again come under Part II of the War Damage Act. Very large payments can be made under that Act for buying furniture and setting-up a house again. The hon. Member says that people would like to maintain the same standard as they had before. We should all like to do that but it must be realised that we are in the middle of a war and that very few people will be able to do that. As far as imme-


diate necessities are concerned the point has been met. When the hon. Gentleman says that it has not been met very well in particular cases and speaks about what some 50 men stated at some office last Saturday, I am perfectly prepared to say to him in respect of any cases that come to his notice—as has happened in the case of many hon. Members—that if he likes to ask me to make inquiries I will certainly do so. I have had a lot of correspondence with Members and it has been my experience—I am sure it is not true of constituents of the hon. Member—that in dealing with constituents of other hon. Members there has not always been that strict honesty and rectitude on the part of the applicant he seems to think is the case.

Mr. Gallacher: There is, in general.

Captain Crookshank: I quite agree, in general, but in particular cases there are people who try to get all they can whether they are entitled to it or not. If there are any difficulties in particular cases which the hon. Member and other hon. Members have in mind, I shall be glad to look into them. In so far as payment is made in cash, it is made in the light of replacement costs at the moment. When the hon. Member says that a man gets £5, and that if there were no Purchase Tax he would be able to purchase 25s. worth more goods, I should think it is the other way round, because payment would be 25s. less. Replacement value is a factor which is taken into account in assessing the claim of the applicant. An applicant is not given the money for what £5 will buy; he is given it because it is thought that the sum is the replacement value now for the necessities that have been lost.

Mr. Lipson: Is the argument of the right hon. and gallant Gentleman that it would cost the Government and the country nothing to make this concession because they are meeting this through the War Damage Act?

Captain Crookshank: What is done is that there is a payment made to replace necessities taking into account replacement costs at that moment and that is all there is to it.

Mr. Lipson: Am I right in assuming that the right hon. and gallant Gentleman's argument is that it would not cost

the Government anything to make this concession because they are already paying for the Purchase Tax through the War Damage Act?

Captain Crookshank: To that extent, that might be one way of putting it. It is quite another thing to change the structure of the Purchase Tax for other reasons. In hardship cases the point is met by the payment which is made to the applicant, but to say that we should make arrangements for removing the Purchase Tax on goods purchased to replace losses is quite another matter. Payment is what is required for immediate necessities. The general proposition refers to goods purchased to replace losses of every kind, whether immediate and necessary or not. That is quite another point. For immediate hardship cases the matter is met by the amount now paid out. I am sorry if the hon. Member is disappointed, but I am sure he did not think it would be possible, in view of the Purchase Tax situation, for the Chancellor to be able to make a concession in this manner, the working of which would necessitate an enormously complicated administrative machine.

Mr. Gallacher: Is it not the case that where applicants overstate their losses, they are generally found to be supporters of, and often to have been corrupted by, the Tory party?

Mr. Silverman: I think the Committee is entitled to complain of the complete frivolity with which the right hon. and gallant Gentleman has met the perfectly reasonable case put forward by my hon. Friend. That frivolity does not do justice to the argument which has been presented, and, if the right hon. and gallant Gentleman does not mind my saying so, it does not do justice to himself. My hon. Friend's argument was divided into two propositions. The first was that purchases amounting to £20 per person per year should be exempt from the Purchase Tax altogether, and the second was that replacement of losses by enemy action should not be subject to the tax. What did the right hon. and gallant Gentleman say with regard to the first proposition? I did not understand him to advance a single argument against the principle. By his silence, he apparently concedes that the case is reasonable. [Interruption.] He said nothing


to the contrary: not one word. He said that the Government could not consider granting this, because it was beyond his ingenuity to imagine any way in which it could be made operative. When my hon. Friend intervened to suggest a perfectly simple and practicable and easily-operated method whereby the principle could be put into operation, the right hon. and gallant Gentleman left the point, and said no more about the rights and wrongs of it or about its practicability. We must assume, therefore, that it is practicable.

Captain Crookshank: No.

Mr. Silverman: If you do not attempt to meet a man's argument, and then, when you are challenged to say whether your silence means that you agree with it, you say, "Oh, no, I do not," that is a frivolous way of dealing with the argument. The figure of £20 a year is substantially below the figure which appears in the Ministry of Labour's report of the amount normally spent by working-class people on the necessities of life. I think my right hon. Friend would have been perfectly justified in taking the figure mentioned in that report. He might have said, "We are not asking for treatment different from that given to other sections; we are asking only that if, by the misfortunes of war, people are singled out for special loss, that loss shall be equitably borne, and in so far as the victims have to bear any portion of the loss themselves they shall not have to pay a tax to the Government on the effects of Hitler's bombs." If my hon. Friend had chosen the figure in the report, that could not have been objected to; but he did not do so. He said, "We will bear a portion of this loss ourselves, although it is inequitable that we should do so."
If we go back to the origins of this tax we see how reasonable his argument is. A year ago it was said that we must have this tax for two reasons: in order to restrict consumption, and because the Exchequer wanted the money. Many of us on this side, especially my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) were concerned about it. My right hon. Friend was at great pains to point out that there was a conflict of purpose between those principles, that in so far as you succeeded in limiting consumption, you did not get

the money, but in so far as you raised the money, you were not limiting consumption but increasing it. That seemed to me to be a logical dilemma and the Government did not get out of it. Various things have happened since. The limitation of consumption was not secured by the Purchase Tax and Limitation of Supplies Orders, and a wide extension of the rationing system was needed before consumption was reduced, and it is not yet reduced to such a figure as it will have to reach before this thing is through.
As far as raising the money was concerned, the logical step was taken—I did not like it but it was logical and inevitable—of lowering the limit at which Income Tax becomes payable. By the Purchase Tax you control consumption and put an extra direct tax upon these people and still you maintain the Purchase Tax after the purposes to be served by it have been served by other means. If the Government feel bound to maintain it, there are some exceptions which we are entitled to make. We say that you should go to the poorest section of the community, the people who would get the advantage of my hon. Friend's Clause and fix not the figure that they normally spend on necessities, but a substantially lower figure, and exempt them from Purchase Tax, in view of the fact that you have got more money from them directly, that their consumption is limited anyhow, and that at all times they consume very much less than other people. I put it to the right hon. and gallant Gentleman in all seriousness that his argument may be answered, but I do not think that it should be of such a nature that the Government should pass it by remaining completely dumb and silent. I leave that part of the argument there.
On the second part of the Clause which exempts from the Purchase Tax goods purchased for replacements, I would ask the right hon. and gallant Gentleman what he says about that. He says, in the first place, "You need not worry because the replacement of any necessities lost by enemy action in that way is already provided for and need not fall upon you at all. Go to your public assistance committee, who will give you enough money to replace them." If that argument is a sound one, it means, what my hon. Friend opposite asserted in his intervention, that it would cost the


Government nothing to grant this concession. That must be so. If this concession would cost the Government something, what would be the cost? Obviously, it can only cost the difference between the value of the Purchase Tax in these circumstances and what the Government already provide. There is, therefore, that difference to be met. The truth is that this is not covered already. The replacement value that is given is subject to all sorts of calculations about depreciation. If a man has lost tools which he had had for five years, you do not give him the full cost that would enable him to go into the open market and replace them at to-day's figures. The right hon. and gallant Gentleman must not pretend in this Committee that public assistance committees do anything of the kind. If they did, the kind of indignation described by my hon. Friend the Member for Stoke (Mr. E. Smith) would not exist and let me assure the right hon. and gallant Gentleman that there is a great deal of passionate indignation about the handling of this kind of matter.
Supposing there were some cost to the Government on this arm of the Clause, it could only be very small and I do suggest that if the Government grant it the loss of revenue would be superabundantly made up in good will all over the country. It is very small concession indeed; it would cost little and would be of great worth in morale, temper and good will. My hon. Friend said something about loyalty to the Government and one's party and that kind of thing. Well, I cannot see that there has been any change in the merits of this case since my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) made his very powerful speech a year ago. The merits of the case have not changed since then. What has changed is the responsibility, and the share of responsibility, of different parties for Government policy and I cannot see why our opposition to the Government on this limited point, should be more embarrassing to the Government or to any members of the Government than the Amendment moved by my hon. Friend for East Ham South (Mr. Barnes) was embarrassing to the First Lord of the Admiralty.
I think we can dismiss considerations of that kind from our minds completely. The Committee should be realistic enough

to deal with cases on their merits, as presented in argument and the inter-play of Debate. We are not in such a serious a set of circumstances that we are entitled to skulk behind anybody's back or behind an official Whip. If a case is made out let Members have the courage to vote as their conscience dictates. If anyone does that, I cannot see that he is doing a disservice to his party, to the House of Commons or to the country.

Mr. Lipson: I want to make a few observations with regard to the second proposal in the Clause now before the Committee—that the Purchase Tax should be removed from those articles which are bought to replace loss caused by enemy action. I must ask the Chancellor whether he does not agree that, in taxation, one has to consider to-day the effect on public morale of any action which is taken. I consider that there is nothing more dangerous to public morale than that when people are bombed out of their homes and lose everything, they should have to replace articles upon which the Government have imposed taxation. The effect on morale is not confined to the individuals concerned; the matter is talked about and generally has a disturbing effect which is quite out of proportion to the financial considerations involved. But the Financial Secretary replies, "These people are no worse off because under the War Damage Act they are given a sum of money in which the Purchase Tax is taken into consideration" Do they really understand that? When they go to buy something, all they know is that if they want to buy something for £37 10s., there is a Purchase Tax of £12 10s. on it. If, as his argument implied, although it was challenged in some parts of the Committee, it would cost the Government nothing, it would be a more effective way of dealing with the problem to say that these goods will be free from the Purchase Tax, so that a person can buy to the full amount, apart from any Purchase Tax.
Therefore, I ask the Financial Secretary whether he will not agree to accept the principle of the second part of the Clause, and try to work out how it can be put into effect at a later stage of (he Bill. I must say to the Chancellor that if he is going to insist on the Purchase Tax being paid on articles that are bought


to replace those which are destroyed by enemy action, he will place himself in a very difficult moral position. He will be financially interested in the success of Hitler's bombers. The more damage they do, the more money he will recoup under the Purchase Tax. I am not a lawyer and I do not know whether, when Hitler and his accomplices are tried, the Chancellor will have to be tried also as an accomplice after the event, or for having shared in the spoils; but strong as is the argument that we should take the profit out of war, even stronger is the argument that the Chancellor should not take to himself the opportunity of getting any profit out of the sufferings of people who have been bombed by the enemy. I appeal to him to accept the principle and see whether the arguments which have been advanced from various sides of the Committee cannot be accepted.

Mr. R. C. Morrison: I have been in the House long enough to know that once the Financial Secretary has replied to a Debate, there is not the slightest chance of his changing his mind, but there is one point I want to put to the right hon. and gallant Gentleman. Although the Treasury may not be prepared to accept this Clause, they ought immediately to direct their attention to the question whether there cannot be an entirely different attitude towards people who have had their property damaged by enemy action from that which is taken to-day. We have heard sometimes about the Ministry of Information sending round special gangs of investigators to find out what is the attitude of the people to the Sunday opening of cinemas, and things of that sort. I suggest that the Ministry of Information ought to send round bands of people to cross-examine people about their experiences in the matter to which I am referring.
If the Financial Secretary could have the opportunity of listening to the plain and unembellished stories which these people tell when they come before the officials who have to assess the amount of damage, he would be surprised. Hundreds of these people are interviewed, and they seem to have the impression—and all of them cannot be mistaken—that when they see the officials, they are treated as if they had committed some crime. For

instance, a person is asked, "How much did your coat cost?" The reply is given "£2 10s."—"How long have you had it?"—"About 18 months."—"Then it is not worth £2 10s. now but only about 10s. or 15s.; if you have had it all that time, you have had good wear out of it." Finally, the amount is fixed, and if it is ultimately decided that the sum shall be only 15s., and the person gets that sum, plus the Purchase Tax, he or she cannot get a replacement of the article lost. The Financial Secretary to the Treasury should use his influence to see that something is done about the way in which these claims are considered.

Mr. Silverman: Does the hon. Member not realise that no amount of good will on the part of the investigators, and no amount of change of attitude would really produce the effect he desires, unless there is this change in the law?

Mr. Morrison: I am simply putting the point to the Financial Secretary to the Treasury. This war may be won or lost by the side which keeps up its morale the 'best, and I know of nothing—and I am speaking as a representative of a constituency where a great number of houses have been damagd by enemy action—which will discourage people more, and cause more discontent, at a time when they are keeping up their spirits wonderfully, than this kind of thing. It does get them down. If the Financial Secretary is obdurate and does not intend making this concession, I hope he will not leave the position as it is, but that he will look into the disastrous effect this assessing of damage is having on the morale of the people.

Captain John Dugdale: I happen to be serving at the moment with troops in an area which has not been bombed but every day I see men having to go back on compassionate leave because their homes have been destroyed by enemy action. I have been able to see the effects on people whose homes have been destroyed. An appeal has been made on behalf of every class of the community, and I would make a special appeal on behalf of serving troops, sailors and airmen. It may be that in certain cases wages have gone up, but the wages of soldiers, sailors and airmen have not risen to anything like the extent to which


prices have increased. Their wages have remained much about the same. There have been certain increases, but, in general, it may be said that their wages are insufficient to allow for any appreciable savings. They cannot save to provide against the sudden destruction of their homes. To add to the cost of replacing these homes by the imposition of a special tax is unfair to them, and will not in any way help to improve their morale. I hope the Chancellor will recall that when this tax was originally imposed we had not experienced anything like the amount of bombing which has since taken place. We did not quite realise what the problem would be. We envisaged perhaps a greater loss of life, but not nearly so much loss of property. The Chancellor can, by a very small sacrifice, get good will among all classes of the community, and not the least among serving members of His Majesty's Forces. He is a man, I understand, with sound business instincts. Surely ft will appeal to him to get that greater good will for so small a sacrifice?

Mr. Gallacher: Very few speakers have referred to the first part of the new Clause. I remember, during the Second Reading Debate, drawing attention to the fact that this was not a revenue-producing tax but a poverty-producing tax. As the Mover of the new Clause so clearly demonstrated, it is the poorest who have to bear the heaviest burden, because the biggest proportion of their incomes goes on those purchases which are taxed. When a proposition is made for a taxation limit on incomes, the Financial Secretary asks how it is going to work, but when it comes to getting money out of the workers, he knows how to go about it. All you have to do is to use coupons for clothes, boots and shoes.
There is no reason why, if hon. Members have any concern for the poor people of the country, the first part of the Clause should not be accepted. It is nonsense, humbug and trash to suggest that there is any equality of sacrifice or suffering. Everyone knows it is not true. Everyone

Division No. 20.]
AYES.



Barnes, A. J.
Hannah, I. C.
Sloan, A.


Broad, F. A.
Harvey, T. E.
Stokes, R. R.


Buchanan, G.
Leonard, W.
Taylor, H. B. (Mansfield)


Chater, D.
Lipson, D. L.
Watson, W. McL.


Daggar, G.
Maxton, J.
White, H. Graham (Birkenhead, E.)


Dugdale, Captain John (W. Bromwich)
Morrison, R. C. (Tottenham, N.)
Wilson, C. H. (Attercliffe)


Dunn, E.
Price, M. P.



Edwards, N. (Caerphilly)
Roberts, W.
TELLERS FOR THE AYES.—


Gallacher, W.
Silverman, S. S.
Mr. Ellis Smith and Mr. Woods.

knows that the heaviest burdens are placed on the suffering. What the hon. Member for North Tottenham (Mr. R. C. Morrison) says is quite right about those who are affected by replacement. The Financial Secretary was deliberately trying to fool the Committee. He gave the impression that those who investigate the position provide the money to get the necessary replacement at the prices operating to-day. It does not work that way. People are asked what they paid for their clothes and how long they have had them. With the money that they are given, and with the Purchase Tax on top of it, replacement of the articles is out of the question. The money that the Assistance Board pays out comes from the Exchequer, and you have the foolish, expensive process of handing out money to a particular individual and, when he has spent it, a lump of it is drawn back by the Chancellor. That is a most expensive and extravagant way of carrying on business. The hon. Member said that those who go to see these officials are treated as if they had committed a crime, and I agree with him. When the hon. Member for Dumbarton Burghs (Mr. Kirkwood) said that bombed-out people were treated as criminals he was subjected to an unprincipled attack from the Tory side. Some of the officials are all right, but the general attitude is that, having such a Chancellor, such a Financial Secretary, and such a Government, they have to cut down expenditure to the very minimum. That is what has happened, and these people are treated as though they had committed a crime. The Clause would not cost the Treasury a great deal of money, and it would create a very great feeling throughout the country that some effort was being made to consider the feelings of the bombed-out people and to help them to make their way along the rough road of life.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 24; Noes, 97.

NOES.


Adams, Major S. V. T. (Leeds, W.)
Heneage, Lt.-Col. A. P.
Rickards, G. W.


Adamson, W. M. (Cannock)
Holdsworth, H.
Ridley, G.


Albery, Sir Irving
Hurd, Sir P. A.
Robertson, D. (Streatham)


Aske, Sir R. W.
James, Wing-Comdr. A. W. H.
Royds, Admiral Sir P. M. R.


Beamish, Rear-Admiral T. P.
Jarvis, Sir J. J.
Russell, Sir A. (Tynemouth)


Beechman, N. A.
Jeffreys, Gen. Sir G. D.
Salt, E. W.


Bossom, A. C
Jewson, P. W.
Samuel, M. R. A.


Boulton, W. W.
Jowitt, Rt. Hon. Sir W. A.
Sanderson, Sir F. B.


Brabner, R. A.
Kerr, Sir John Graham (Scottish U's)
Scott, Donald (Wansbeck)


Brocklebank, Sir C. E. R.
Lamb, Sir J. Q.
Seely, Sir H. M.


Brooke, H.
Law, R. K.
Shaw, Capt. W. T. (Forfar)


Cadogan, Major Sir E.
Lindsay, K. M.
Sinclair, Rt. Hon. Sir A.


Campbell, Sir E. T.
Little, Dr. J. (Down)
Smith, Rt. Hon. H. B. Less- (K'ly)


Carver, Major W. H.
Loftus, P. C.
Strickland, Capt. W. F.


Cooke, J. D. (Hammersmith, S.)
Lyle, Sir C. E. Leonard
Stuart, Lord C. Crichton- (Northwich)


Crookshank, Capt. Rt. Hon. H. F. C.
McEwen, Capt. J. H. F.
Stuart, Rt. Hn. J. (Moray and Nairn)


Culverwell, C. T.
McKie, J. H.
Sutcliffe, H.


Denman, Hon. R. D.
Magnay, T.
Tate, Mavis C.


Duckworth, Arthur (Shrewsbury)
Maitland, Sir A.
Thomas, J.P. L. (Hereford)


Erskine Hill, A. G.
Makins, Brig.-Gen. Sir E.
Touche, G. C.


Foot, D. M.
Mander, G. le M.
Wardlaw-Milne, Sir J. S.


Fraser, Capt. Sir Ian
Mayhew, Lt.-Col. J.
Webbe, Sir W. Harold


Fremantle, Sir F. E.
Mellor, Sir J. S. P. (Tamworth)
Whiteley, W. (Blaydon)


Goldie, N. B.
Munro, P.
Williams, Sir H. G. (Croydon, S.)


Graham, Captain A. C. (Wirral)
Naylor, T. E.
Windsor-Clive, Lt.-Col. G.


Granville, E. L.
O'Neill, Rt. Hon. Sir H.
Wise, A. R.


Greenwood, Rt. Hon. A.
Paling, W.
Wood, Rt. Hon. Sir K. (W'lwich, W.)


Gridley, Sir A. B.
Peters, Dr. S. J.
Wootton-Davies, J. H.


Griffiths, J. (Llanelly)
Pethick-Lawrence, Rt. Hon. F. W.
Young, A. S. L. (Partick)


Grimston, R. V.
Peto, Captain B. A. J.



Hammersley, S. S.
Pym, L. R.
TELLERS FOR THE NOES.—


Hannon, Sir P. J. H.
Rankin, Sir R.
Major Dugdale and Major Sir


Harris, Rt. Hon. Sir P. A.
Reed, Sir H. S. (Aylesbury)
James Edmondson.


Henderson, J. J. Craik (Leeds, N.E.)
Reid, W. Allan (Derby)

NEW CLAUSE.—(Rule 13 to apply to professions or vocations.)

Rule 13 of the Rules applicable to Cases I and II of Schedule D (which provides for the set-off of losses against profits or gains in distinct trades) shall have effect as if the word "trades" in the said Rule included professions or vocations, and where any person in any profession or vocation has sustained a loss to which the said Rule applies during the previous six years of assessment, he may claim that such loss shall be deducted from or set off againt the amount of any profits or gains on which he is assessed under Schedule D in respect of that profession or vocation—[Mr. A. Edwards.]

Brought up, and read the First time.

Mr. A. Edwards: I beg to move, "That the Clause be read a Second time."
This new Clause is introduced with the object of removing an anomaly under which professional men do not enjoy the same privileges as business men. I do not think it was ever intended that it should be so, but I am advised that that situation arises in connection with Rule 13 of the Rules applicable to cases I and II of Schedule D, which provides for the set off of losses against profits or gains in trades. Decisions have been given which mean that professional men are not supposed to come into this category. It does

not say so specifically, but it was ruled that they are not included, and that seems to be an injustice to professional men. If I am running two distinct trades or businesses and I am making a profit on the one and a loss on the other, I am allowed to offset the loss against the profit. A professional man is not allowed to do that. It does not seem to have been intended that the Rule should operate in that way, and it was only when decisions were made that it was seen to penalise certain professional men. I was asked to endeavour to get the anomaly removed. The question is whether they come under trades. It has been ruled that they do not. I think there can hardly be any controversy about this matter. I do not think anybody wants to put professional men in a different category. I hope that the Chancellor will see his way to consider this matter, and if the proposed new Clause is not acceptable in its present form, I hope he will find some way to remove the anomaly.

Captain Crookshank: The hon. Gentleman has made out a case. This is really a historical survival, partly, no doubt due to the fact that when the Income Tax laws were originally started a case where a professional man had a trade, or vice versa, was unlikely. I would ask the hon. Gentle-


man to leave the matter in the way I suggest. The first part of the proposed new Clause is the important one, down to the word "and" in the third line. It covers the general principle. My right hon. Friend will look into it, with the view to proposing an Amendment upon the Report stage. We have to consider consequential Amendments dealing with Excess Profits Tax, National Defence Contribution and all that part of the taxation. With regard to the latter part of the proposals, we frankly admit that we are not quite sure of its intention. Perhaps when the hon. Gentleman sees our proposal we might discuss the matter further.

Mr. Edwards: In view of the statement made by the Financial Secretary to the Treasury, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Deduction in respect of additional expenses incurred in removal or in travelling to and from employment.)

Where, through enemy action or economic circumstances in the industry, any person incurs unavoidable additional expense in travelling to and from his employment, or where any such person changes his employment to take up essential war work in a district other than that in which he resides and thereby incurs unavoidable additional expense in removal or in travelling to and from his employment, he may claim that such additional expense shall be deducted from or set off against any profits or gains accruing from such employment, and paragraph (a) of Rule 3 of the Rules applicable to Cases I and II of Schedule D shall be construed accordingly. — (Mr. G. Macdonald.)

Brought up, and read the First time.

Mr. Gordon Macdonald: I beg to move "That the Clause be read a Second time."
I put forward this proposal with some confidence because of the attitude of the Chancellor of the Exchequer when it was discussed about two months ago. It is aimed at removing certain difficulties which we all appreciate. The question needs to be examined with some sympathy by the Chancellor of the Exchequer. These men do not choose to live so far from their work in many cases, and even if they do, they are to be complimented.

I never agreed that a man should live on a pit top. He sees enough of the pit during his working hours; and I cannot blame him for getting as far away as possible from the pit when he is not working. The Chancellor of the Exchequer knows that the differences in expenses may vary from 5s. to as much as 10s. a week or slightly more in these cases.
Let me give an example. A man may live next door to another, who is working at a local colliery. They draw similar wages, but because the former has to get up an hour earlier and travel perhaps 10 miles by bus or train to his work, he has to spend two hours more at least away from his home each day than is the case with the man next door. He is nevertheless penalised, and that cannot be justified in any way. I feel sure that the Chancellor will find that relief should be given in such cases; if not in the way suggested, then in some other way.

Mr. Graham White: I wish to support what has just been said. My hon. Friend spoke more particularly about mining areas, but I have information in some detail in connection with big industrial areas. I urge the Chancellor of the Exchequer to accept the proposed new Clause on the ground of its effect upon production, which is dependent in general upon the fitness of those concerned. In normal times I do not think the case for considering this proposal would be so great, but in these times men do not always choose where they work. That may make a difference of 10s., 15s., or— and I have a case—of 23s. a week in expenses, over which the man has no control whatever.
I could speak at length on this matter and cite a large number of cases, but I am satisfied that, in the cases where people have to leave their homes, where they may have suffered great loss from air bombardment and furniture has been destroyed, and when, on top of that, they have to live 10 or 15 miles or even further distances from their work, there are consequent increases in their expenditure over which they have no control whatsoever. They then say they will have to pay Income Tax on that sum of 10s. or 15s., and it is a source of great irritation. It is an anomaly which, I think, could be removed in the interests of production and the war effort.

Mr. Price: I also want to support this Clause. I have in mind my constituency with a working-class population working outside the coalfield, in munition works a considerable distance away. For a number of reasons the munition works in my constituency did not come directly to the coalfield, and there was a demand soon after the outbreak of war for skilled men to go to those works. At very considerable sacrifice men have gone, and many hundreds have to travel not only 10 miles a day as my hon. Friend has mentioned, but in some cases up to 40 miles, 20 miles there and 20 miles back, incurring bus expenses of 5s., 8s. or even 10s. a week, which have to be deducted from their wages. I suggest that cases of that sort require looking into. In the case of land and house property, Income Tax is collected under Schedule A after certain reasonable expenses have been deducted. I suggest that in the case of a workman, whose only property is his labour, reasonable expenditure of that kind should also be deducted. It is much the same kind of thing, and if there is a case for reduction in one, there is a case in the other. I also feel that it tends to lower the morale when there is a feeling of inequality, as must occur when men living in the same town or village as others working there have to go a long way to work in answer to the nation's call and are penalised in comparison with the men who work close to their homes. If the Chancellor can possibly see his way to equalise their position he will be raising the standard of morale in industrial districts where these conditions apply.

Sir K. Wood: My hon. Friends have put their case, as they always do, with considerable force and reason, and while, as they quite understand, I am not really in a position to make many concessions in view of the financial difficulties which face me, I feel I ought to try to do something to help in this particular matter. At the moment I am only just indicating what is in my mind; I will confer with my right hon. and gallant Friend and with those who are interested as to the kind of Clause I would put upon the Paper, for obviously I must have some protection. I understand that the request is made particularly on behalf of what you might call the workers, and I must not become involved in extending it to all classes of the com-

munity. As I understand it, the case is being put in the interests of the war effort on behalf of men who have been practically ordered to go away to work at distances involving considerable travelling expenses. It will also be necessary to have some limitation in regard to the amount, but that I can discuss with my hon. Friends outside. I will therefore consider, between now and the Report stage, exactly what I can do and the amount I can sacrifice. It may mean a fair sum, even with a limited concession, but I feel, for the reasons my hon. Friends have given both in regard to the war effort and the encouragement of the men, that this is a case where I should be justified in making a special exception.

Mr. Tinker: I want to say on behalf of my hon. Friends and myself that we appreciate the sympathetic attitude of the Chancellor, and we believe that he will try to do something before the Report stage. I can only add that this is a concession to working people which will be appreciated, and I can emphasise what has been said from these benches that travelling to and from work is one of the things to which the workers expect more regard to be given. It is very unfair that 5s., 6s., or even 10s. a week should be taken out of their wages and there should be no recompense. Therefore I am very pleased indeed that the Chancellor has seen our point of view, and I shall await with interest the new Clause he is to draft.

Mr. Woodburn (Stirling and Clackmannan, Eastern): I regret that I was not able to be present during the discussion, and I would like to make a constructive suggestion to the Chancellor. The difficulty about making the concession will be the control of it. There are, therefore, two or three points which strike me. I believe that at the moment a man who is sent by his employer to another town to work, and whose travelling expenses are paid in addition to his wages, has no Income Tax charged on the travelling expenses. I suggest that the same rule should be applied to men sent from their towns by Employment Exchanges. [AN HON. MEMBER: "That is going to limit it."] That is one way, if a man is appointed by the Employment Exchange to go to work 20 miles or 15 miles away in a factory, or a miner is sent down from the valleys to Cardiff to work. That is under Government control, and there is


no difficulty. In the case of people who have been blitzed, I can speak of people in my own area. Some of them are from 25 to 30 miles away. They have to travel to important work every day in connection with the Admiralty, and it is quite unjustifiable that they should have to pay Income Tax on that travelling. It is just as effective as though their employers had sent them away. Evacuation is under the control of the Department of Health in Scotland and the Ministry of Health in England, and if the Chancellor could have the approval of these Departments there would be a check through them or the Assistance Board. These are two methods by which there could be control. I do not exclude the concessions that could be made in other directions, but very frequently the Chancellor puts it to. us that unless we can suggest some means of doing what is asked he cannot do it, and I think it well to offer constructive suggestions when we can do so.

Sir J. Lamb: I think it would be very inadvisable for us, after what the Chancellor has said, to consider this matter in detail. The satisfaction at the statement made by the Chancellor will be felt on all sides of the House. I would like to add something about what the Chancellor cannot do and which, therefore, is not a detail of what he is going to do. There will be an additional loss to the men in loss of time which cannot be included in this concession. I hope that when he is being sympathetic to those men he will remember that these men have lost time as against a man living near to his work. Do not let us consider the details. These will be gone into later on, but I wish to say that we on all sides of the House do appreciate the statement made by the right hon. Gentleman.

Mr. G. Macdonald: In view of the Chancellor's undertaking, I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment to the Seventh Schedule of 2 and 3, Geo.6.)

Paragraph II of the Seventh Schedule to the Finance (No. 2) Act, 1939, is hereby repealed. [Sir H. Williams.]

Brought up, and read the First time.

Sir Herbert Williams: I beg to move, "That the Clause be read a Second time."
The point is quite a simple one. Under that paragraph, there was brought into operation what seemed a rather strange change. In determining whether someone has made a profit or not, it is not generally assumed that a profit has arisen until the article has been made and, indeed, delivered and invoiced. Here is a case where it is assumed that a profit has been made on articles in the course of manufacture. I never noticed it at the time, and I do not imagine that many people did, because when changes appear in the Schedules we sometimes miss them. It is wrong to assume that a profit has arisen until it has in fact arisen. I heard of a case the other day where a firm have to produce two lots of accounts. One is for purposes of Income Tax, in respect of which they have never assumed any profit on work in progress, and the other is for purposes of E.P.T., for which they have to assume a profit before the work is completed. It may be that the Chancellor will say that it is all right, that it will all come out in the wash next year; but I do not think a profit should be taxed before it has been made. I hope that the Chancellor will make some concession to remove what seems to me to be an absurdity.

Captain Crookshank: The hon. Gentleman does raise a point of some difficulty in regard to accounting periods; but suppose you have a contract for something which will take a long time to build —a battleship, say. At the end of the work there will be a profit on it, but it may be very hard to get hold of all that profit in one year when it has been accruing throughout the period. That is what was in mind when the paragraph was originally enacted. I think that, from the point of view of the taxpayer, it will be more advantageous generally that for E.P.T. collection should be done in this way. In respect of Income Tax, the question does not arise. I think the hon. Gentleman had better leave the matter where it is at present, and see how it works out.

Sir H. Williams: I fully appreciate the point made by my right hon. and gallant Friend in regard to cases where you are dealing with long contracts, like the construction of a battleship or some great


public works, which may extend over many years. In such cases there may be something to be said for this exceptional treatment, but in the case of an ordinary business, which each year gets orders for hundreds or thousands of pounds' worth of goods, delivering them every week, so that the process is more or less continuous, I do not think a profit should be deemed to have arisen until it has been made. In view of what my right hon. and gallant Friend has said, I will ask leave to withdraw the Clause now; but I ask him to consider the application of this to cases where the work is not a long time in progress.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Extension of allowances in respect of children to persons who are mentally or physically incapable of work.)

For the purpose of relief of assessment to Income Tax in respect of children, any child who, because of mental or physical disability, is incapable of employment shall be deemed to be a child of less than fourteen years of age. —[Sir H. Williams.']

Brought up, and read the First time.

Sir H. Williams: I beg to move, "That the Clause be read a Second time."
I want Income Tax relief to be extended in respect of any child whom the parents have to maintain, in exactly the same way as in the case of aged dependants. It is of the same principle where there is a state of complete dependency of this kind and where people are therefore subjected to special expenditure. I have one particularly bad case in mind where people who are not at all well off are in the position that they have to maintain a child who is mentally quite incapable. It is a terrible burden on these people. In other cases they may be maintained in homes, and in some cases people may have to employ a special nurse, but generally these cases represent very substantial hardship. I realise to the full the difficulties of the Chancellor of the Exchequer, who is always trying to resist leakages in his revenue. These things did not matter so much until the Income Tax reached the oppressive limits of today. There are hardships upon some people which are really intolerable, and

it is in the light of such circumstances that I move this Clause.

Mr. Tinker: I would like to support the new Clause. I did not realise, before my hon. Friend mentioned it, the difficulty in respect of the child incapable of looking after itself owing to suffering from some physical or mental ailment. It seems to me that in such cases there ought to be some protection, and it is unfair that parents should have to bear the whole of the burden. Now that taxation has been extended to cover smaller incomes a working-class family may come under the burden of Income Tax with a child to support such as in the case described by my hon. Friend. It would be rather a big burden for such a working-class family to have to meet the cost. This sort of thing would not appear to be a very big burden if it were confined to members of the wealthy class, who would have the money with which to pay, but I can see that this may hit members of my class, and I want something to be done to help them. This is a good proposal, and that is why I join the hon. Gentleman the Member for South Croydon (Sir H. Williams] in supporting it. I would not join him if it had not been a good Clause, because I am always suspicious when he brings anything before us. On this occasion I realise the soundness of his proposal, and that is why I am supporting it.

Mr. Woodburn: I would like to say, speaking in support of the new Clause, that the only thing about which I am in doubt is whether it would include a person who might be considered a child up to the age of 30 or 40 years. I would ask the Chancellor of the Exchequer, if he is going to accept this Clause, to deal with this in order legally to include all these people. I do not think that we should find this sort of thing confined to one section of the population. It is very sad when it occurs in a family, and however poor a family may be, it is remarkable how they try not to part with a child of this character. I hope that the Chancellor of the Exchequer will make a concession of this kind in order to help to relieve this hardship.

Captain Crookshank: The hon. Gentleman who has just spoken has by implication showed the difficulty of this Clause. He said that he hoped that it would mean


that a person would be considered a child up to the age of 30 or 40 years. Well, of course, we all agree that we are dealing now with a very sad case. That is common ground. What is the position with regard to these allowances? At present the parents of a child under 16, or a child over 16 who is undergoing education, or, as we said in the Finance Act of 1938, is receiving certain forms of vocational training, receive an allowance of £50 per annum. But now we come to the difficulty which the hon. Gentleman does not quite appreciate. This allowance of £50 is given to children because they are still being educated and have not gone out into the world. But the allowance for dependent relatives who are infirm, incapable and so on is not £50; it is £25, and I cannot see how we would have the anomaly that would inevitably arise —

Sir H. Williams: I am quite ready to do a deal on that fact.

Captain Crookshank: But the deal is much too expensive for us to contemplate in present circumstances. The whole question of dependants' allowances has been frequently argued. The Royal Commission of 1920 came to the conclusion that there should be no change, and that position has since been maintained. On reflection I think the hon. Gentleman the Member for Eastern Stirling (Mr. Wood-bum) will see that it is quite impossible to accept a proposal that the parents of a child who get an allowance of£50 per annum during an educational period— presumably the child would not receive any education if he was half-witted— should continue to receive that allowance indefinitely thereafter while other dependent relatives receive an allowance not of £50 but of £25. It is not really possible to allow that particular anomaly to arise, and because we cannot deal with that general problem now, in view of the great calls which have been made in all directions on the Budget, I hope my hon. Friend will not press the Clause, having seen the difficulties which I have explained.

Sir H. Williams: There is always a difficulty when a private Member tries to draft a new Clause, particularly under the pressure which most of us are undergoing. I think it would be better to treat these people as dependent relatives, and I do not want my right hon. and gallant

Friend to think he will save money by refusing, because the people who have made desperate efforts to maintain these mentally incapable children will no longer be able to go on doing so. They will have to avail themselves of the public services, where they will get it done for nothing. In effect, the cost to the State will be much greater than if the concession was made. People who were able to carry out this task when Income Tax was lower than it is now will now have to hand over responsibility to the appropriate local authority or public institution. So the burden on the State will be far greater than it would be if you encouraged these people to make this effort. I believe that in the long run it would be an economy to the Exchequer to do this, and although I ask leave to withdraw the Clause I would ask my right hon. and gallant Friend to think again in the light of the point I have just made.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment of s. 27 of 3 and 4 Geo. 6.)

In the proviso to Sub-section (3) of Section twenty-seven of the Finance Act, 1940, the word "six "in the second line shall be altered to "eight," and the word "eight" in the fourth line shall be altered to" ten" —[Sir H. Williams.']

Brought up, and read the First time.

Sir H. Williams: I beg to move, "That the Clause be read a Second time."
In this case I do not think I shall have the support of the hon. Member for Leigh (Mr. Tinker). It may be remembered that in connection with the Excess Profits Tax there are two methods of assessment, and the object of these two methods is to make the tax reasonable and fair as between one citizen and another. I do not think that because one man has been particularly prosperous in the past he should be allowed to go on indefinitely whereas another man who has had a rather recent unprosperous past should have no consideration at all. That was why, in the Finance Act to which I have referred, my right hon. Friend or his predecessor introduced a provision which was commonly described as the hardship Clause. Under that provision, where a firm's immediate past has, for any reason whatever, provided it with a very low standard, it can apply for an alternative standard based upon its capital, and it is allowed, in cer-


tain circumstances, to have as much as 8 per cent. on its ordinary share capital, subject to the condition, however, that taken over the whole of the capital, the amount is not to be more than 6 per cent.
On the last occasion I tried to explain to my right hon. Friend that this operates very unfairly in the case of companies which have undergone rapid development during a period of great difficulty and adversity—rapid development in the sense that the employment they have provided has grown very rapidly, that they have obtained very little reward, and that they have had to raise the money necessary for the development under most unfavourable circumstances, that is to say by issuing new preference shares at high rates of interest. The holders of these preference shares will continue to get the high rates of interest, and their position is safeguarded, but the men who have taken the fundamental risk, the ordinary shareholders, will not be able, in some cases, to have any reward of any sort as long as the Excess Profits Tax exists. I do not think that, as long as any sort of capitalist system exists, even the hon. Member for Leigh (Mr. Tinker) would say that the owner of ordinary shares in a large company is not to get anything during the period of the war.
I could furnish Individual cases of companies which, under the Clause as it now stands and as long as the Excess Profits Tax remains in operation, will not only be prohibited from distributing any dividend to their ordinary shareholders, but will not be able to make any provision for reserves. That is a position which is very bad and very detrimental to the public interest in the long run, from the point of view of employment after the war is over. In the Debate yesterday, the case for the 20 per cent. being put into cold storage was argued very strongly by the Chancellor, and though there was opposition from some quarters, this received a great deal of support from those who realise that, after all, the fundamental job of employers is to provide employment. That is not a function that will ever be performed by Employment Exchanges, which can only direct attention to where employment happens to exist. Unless the institutions which exist for the production of goods and the provision of employment have the necessary resources, then, when

the war ends, there will be a state of unemployment much graver than would otherwise be the case. On the grounds of public interest, and quite apart from what may be regarded as the selfish interests of people who think that they may be entitled to some payment for their efforts, there is a very powerful case for this new Clause. Whether the Chancellor will make any concession is, of course, a different matter. My right hon. Friend is stony-hearted. However, there are wider considerations of public policy to be taken into account over and above the vitally important and urgent necessity of getting money for the Exchequer. There are powerful arguments for this new Clause which, although it would not affect a large number of cases, would affect an important number of cases, and I ask my right hon. Friend to look into the matter.

Mr. Graham White: It is a little difficult to have this discussion towards the end of our proceedings, because, although I doubt whether my hon. Friend the Member for South Croydon (Sir H. Williams) will get much support for his new Clause, he has in fact raised a quite important case. The Chancellor has done a good deal to recognise the inequality which arises in some instances under the Excess Profits Tax. I do not think there is anybody in the Committee who questions for one moment the desirability of a 100 per cent. Excess Profits Tax, but what has happened, partly because of the beneficent intentions of the Chancellor, is that there is a widespread belief that a company of the sort to which my hon. Friend the Member for South Croydon has referred, is in a position to pay a remuneration of 6 per cent. to those who have put their money into that enterprise. In a limited number of instances that is not the case. I think the Chancellor of the Exchequer knows the kind of case in view. On some other occasion, when we had more time before us, it would have been useful to give more publicity and consideration to this matter. The hon. Member for South Croydon has raised a matter which does not in any way challenge the principle of the tax but the equity of its incidence.

Sir K. Wood: I will carefully note what both my hon. Friends have said on this matter. I cannot go further in making a concession in regard to the Excess


Profits lax than I mentioned in my Budget Statement. While I will study what they have said, and have regard to it in the next 12 months and see what the position is then, I cannot go further than I have indicated in my Budget speech.

Sir H. Williams: In view of the mildly optimistic speech of the Chancellor of the Exchequer, I beg to ask leave to withdraw the new Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Allowance from Excess Profits Tax of expenses arising out of the employment of women in the present emergency.)

In computing the profits of any trade or business for the purpose of excess profits tax there may be deducted in respect of any accounting period a sum equivalent to any expenses incurred in the fulfilment of any statutory obligations in relation to the employment of women if it is shown to the satisfaction of the Commissioners that the introduction of women into the trade or business is due to the present emergency. —[Mr. Wood-burn."]

Brought up, and read the First time.

Mr. Woodburn: I beg to move, "That the Clause be read a Second time."
This new Clause has been moved with a view to relieving certain circumstances which are seriously keeping back production. The Minister of Health is urging firms to employ women labour, and while it is the case that many firms have already been employing women in large numbers, there are cases in the engineering industry where they have not been employed at all. If firms have to employ women, it immediately entails launching out in considerable expenditure on sanitary arrangements and other things required by Statute. In the case of small firms this is a very heavy burden, and some firms are deliberately not employing women because it means that by doing so they will have to sustain a very severe loss. In the case of a firm covering a large expanse, such as a foundry, garage, or engineering works, they may have been compelled to spend between £500 and £700 on black-out, and if, in addition to that, they are now being asked to spend£1,000 in providing special accommodation for women employès, it may be the straw which will break the camel's back. I have come across cases recently where firms have deliberately not accepted the

recommendation of the Ministry of Labour to employ women because of these difficulties.
I recognise the difficulty of drafting a Clause to meet the case, and I have no hopes that the Clause I have drafted will be one which will meet the situation from the point of view of the Treasury; but I have moved it in order to bring this point to the notice of the Chancellor of the Exchequer. The same thing arises in regard to canteens. Some firms have been asked to put up canteens for their workers, and the same principle has arisen, with the result that workers may refuse to work late at night because they have no food. It is most important, if the Government are to enact that firms should build special accommodation and these canteens, that they should make some arrangement for firms which cannot afford to proceed with the work which incurs a definite loss on themselves. We have to assume that industry after the war will require to carry on in much the same way as it is doing to-day until some broader schemes develop, and therefore it is important, from the point of view of the employment of workers after the war, that firms should be in a condition to carry on and, if they are placed in such difficulties that they are left with buildings for which they have no need and with debts which they cannot pay, we may have ruin spreading to a large number of (he small specialised industries which form a very important part of the country's affairs.

Captain Crookshank: I am obliged to the hon. Member for raising the point, because there ought not to be the difficulty about it to which he referred. I will state what the position is, and those who are interested will be able to read it for themselves, and, if they have any further difficulties, they can bring them to our notice, but as at present advised there should be no difficulties. With regard to expenditure of a revenue character, the expenses are automatically allowed as a deduction, in accordance with the the ordinary principles of the Income Tax laws, but it is the capital expenditure about which the hon. Member is particularly worried—sanitary accommodation or canteens or whatever it may be owing to the employment of women. If they will refresh their memories by consulting paragraph 3 of


Part I of the Seventh Schedule, Finance Act (No. 2), 1939, they will see what the provisions are. They are to the effect that, where any buildings, plant or machinery have been provided after the beginning of 1937 for the purposes of the trade or business and have become obsolete or cease to be required after the war, presumably because women would not be employed, any loss in the value of those assets ascribable to conditions prevailing as a consequence of the war will be allowed as a deduction in computing profits. Obviously the cessation of the employment of women after the war in a factory which has had to have buildings erected during the war for the purpose of employing women is exactly one of those factors which would fall to be considered within the rules laid down in the Schedule. The case was meant to be completely met, and I think it has been met. If there is any doubt after hon. Members have looked at it, and they will let me know, it may be considered at some future time, but I do not think there will be any necessity.

Mr. Woodburn: Although this information has reached me and others, what the right hon. and gallant Gentleman has said will certainly place me in a position, if it is put forward as an objection to increasing the employment of women, of calling firms' attention to it. It seems to me that it meets the case.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment of ss. (4) of s. 13 of 2 and 3 Geo. 6, c. 109.)

In Sub-section (4) of Section thirteen of the Finance (No. 2) Act, 1939, leave out all words from "business" to the end of the Sub-section and insert "any one of the years nineteen hundred and thirty-five, nineteen hundred and thirty-six, nineteen hundred and thirty-seven, and nineteen hundred and thirty-eight. —[Sir J. Wardlaw-Milne.]

Brought up, and read the First time.

Sir John Wardlaw-Milne: I beg to move, "That the Clause be read a Second time."
It will be within the knowledge of the Committee that in the computation of profits for the payment of Excess Profits Tax certain years are laid down in the Finance Act (No. 2), 1939. The object of our legislation, as I understand it and

as it has been explained very often, is that Excess Profits Tax should be paid in the shape of money received in excess of the profits which a business would have earned previous to the war, and the object of the House of Commons and the country has been to ensure that people do not make money out of the war. Therefore, we want to see that the profit on which they pay Excess Profits Tax is a figure between their normal profit previous to the war, if they had any, and the figure they are earning under war conditions. With that general principle we are all agreed, and the object of my new Clause is to point out that, as the Act stands, it is not carrying out the intention of the House of Commons. I suppose it is true that in a large number of cases the Act does carry out the wishes of the House, but there are certain businesses, as there must be in a progressive community, which have been started so recently that they can have no standard on which to base the estimate for the Excess Profits Tax in the terms of the Act of 1939. In that Act the standard is taken from 1935 or a combination of years afterwards. There are certain businesses which were either non-existent in those earlier years or which were building up to a profit-making stage. They were perhaps spending money and not earning it in 1935 and 1936, and they are unable, therefore, to prove a standard which gives a fair computation for the imposition of the Excess Profits Tax to-day.
The object of the Clause is to give such concerns as have had no opportunity of earning profit previous to 1937 and 1938 the chance to use one of those years, if it is their first fair standard year, as the basis for the computation of the Excess Profits Tax. We want to see that nobody makes money out of the war, and, therefore, the profits above those earned pre-war should be taxed. We do not, however, want to handicap a business which has perhaps had years of expenditure so that it could get into an earning stage and which by chance—in this case misfortune —arrived at the earning stage just previous to the war, and, therefore, has all its profits taken because it had no previous standing. It is unfair that a business of that sort should get no return of any kind. I do not want to weary the Committee with cases of businesses which have been put before me, and in which


I have no concern, but I want to give an illustration of a business which has been building up for the benefit of British industry and the employment of large numbers of people through 1934, 1935 and 1936, and which got no return and certainly made no profit for its shareholders. It has actually been spending large sums of money, the result of which was shown almost immediately before the war. In a case of that kind a chance ought to be given to take the later years for the standard. It is impossible to put down a Clause which would deal with every case fairly. There will be some cases with which this Clause will not deal. There will be some concerns that would not have been earning profits until this year if there had been no war at all, but we cannot deal with every case. What we want to do is to remove the unfairness to those who have no standard under the present Finance Act and give them a chance to take the years stated in this new Clause.

Sir K. Wood: My hon. Friend is seeking to reopen the question of the choice of standard years, and in particular to allow either of the years 1937 and 1938 to be chosen as the standard year. In his Amendment, to which obviously I must address myself rather than to his speech, I can find no trace of anything winch would single out any of the special concerns which he has indicated have been brought to his notice. His Clause would cover all concerns and allow them all to have the substituted year, and that is the point to which I have to address myself. I regret that at this stage I cannot re-open this matter. It has been constantly discussed in the House, and very many statements have been made by the Government. I would only like to say for the purpose of record, that it was recognised that there might be hardships in cases where there were no profits in the standard year or the profits were so low as not to constitute a reasonable standard, and Section 27 of the Finance Act, 1940, did make provision—my hon. Friend may not think it is sufficient—for a substituted standard of profits to be applied in such cases. I would remind my hon. Friend that we are dealing with the case of borrowed capital and providing, in cases where pre-war losses were incurred, for the loss to be disregarded in computing capital for the purposes of standard. I

am thus helping developing concerns to which my hon. Friend referred in his speech on the Budget. In this way I am endeavouring to deal with at any rate certain aspects of the matter, but I cannot go further than that at the present time.

Sir H. Williams: I am not surprised at my right hon. Friend resisting this new Clause, but I would point out that the years which were selected were never selected on merit. They were selected for the purpose of a different tax, the Armaments Profits Tax, which was introduced to deal with firms engaged upon armament contracts a substantial time before the war began. It was designed to catch those people, and those years were chosen on the ground that during those years we had not really got under way with our armaments programme. When the tax was extended from businesses engaged on armament work to businesses not normally on armament work, a new basis of years ought to have been selected. I think a fundamental mistake was made then. The burdens which fell on certain firms in the textile industry and others to whom those years were bad years have created many difficulties for them. If the Armaments Profits Tax had been kept in existence to deal with firms engaged on rearmament for a substantial period before the war, and the Excess Profits Tax had been applied to the remainder, with appropriate years as a standard, a very much fairer situation would have arisen. I do not suppose that the Chancellor of the Exchequer is prepared now to depart from his present attitude; but I think it is as well that he should be reminded once a year that he is continuing to inflict hardship on a quite decent lot of people who, I am certain, will go on agitating in various ways until some further amendments are made.

Sir J. Wardlaw-Milne: My right hon. Friend has a very large heart, and if he could put his hand on his heart and tell the Committee that there is no unfairness under the present law, I should be only too glad to withdraw this Clause. But in spite of all he has said it is well known to him, I suggest, that the law as it stands does act unfairly towards a small number of firms who have suffered from the wording of the Act of 1939. Nothing that has-been done since has altered that fact. I have nothing to say at this moment of the


measures he has taken in that direction, but they do not take away from the difficulties from which these firms suffer.
I shall not press the matter now, as I know it is not worth doing so at the moment, and I agree that the matter has been considered over and over again; but I contend that it is not impossible to draft a Clause which will prevent the extension of these years to firms that do not need them and will allow the extension to those to whom it is everything, and so form a proper and reasonable basis of Excess Profits. I ask my right hon. Friend to consider the matter again. It is not impossible at all to prevent the loss to the Treasury of sums of money by the extension of those years, where it is not reasonable that they should be so extended. It is all a matter of drafting, and it can be done. There are certainly firms that suffer, and I suggest to my right hon. Friend that he should consider the matter again. In view of the attitude of the Chancellor, with which I do not agree, and while hoping that he will give it reconsideration, I have no intention of pressing the matter now, and I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave withdrawn.

NEW CLAUSE.—(Estates of those killed on service.)

The estate of any person killed in action, dying of wounds received in action, or killed when on civil defence duty, shall be exempt from all Death Duties. —[Lieut.-Colonel Windsor-Clive.]

Brought up, and read the First time.

Lieut.-Colonel Windsor-Clive: I beg to move, "That the Clause be read a Second time."
I am putting forward this new Clause on behalf of my hon. and gallant Friend the Member for Petersfield (Sir G. Jeffreys). It seem to me rather mean that, when a man or woman loses life in the service of the country by enemy action, the Treasury should demand Death Duties in exactly the same way as if life had been lost in the ordinary course of events. Most people to whom the proposed new Clause relates have died at an age when they would normally have many years' expectation of life. I imagine that the Treasury estimate the amount of

money likely to be received from Death Duties, but deaths on active service must upset those calculations very considerably and must mean that the Treasury receive a great deal more money than was estimated. I suggest that the Treasury might forgo the sums received by the deaths of people who have lost their lives as a result of enemy action, and that their heirs should not be required to find these sums when suffering such bereavement.

Captain Crookshank: This matter was raised last year, and I spoke on it then. While not exactly repeating what I said then, I must take exception to one word used by my hon. and gallant Friend, quite by inadvertence, I am sure. He said it was rather mean of the Exchequer to exact the same Death Duties in the case of those killed in action as at other times. Well, we do not. It is not the same. The present law, as a matter of fact, so far as concerns relief for those killed in the Armed Forces and Mercantile Marine, is the same as in the last war. It has all became part of the general law, namely, that those who are under the rank of full sergeants or chief petty officer receive complete exemption from all duties, while in the case of those of higher ranks exemption from duty is provided for the first £5,000 of an estate and for relief to the remainder, the amount depending on the age of the deceased, provided that this estate passes to the widow or certain other near relatives. That is to say, the expectation of life is taken into account in the calculation. That is the law which has been on the Statute Book for some time, and it is the same sort of relief as was granted in the last war.
Since the war began we have extended the same provision to merchant seamen by the Act of last year, and this very Bill, Clause 37 of which went through without any discussion, makes a further large extension in the direction which the hon. and gallant Gentleman wants. We have already enacted, and have put into the Bill at this stage, provisions for those who are killed as a result of enemy action, and not only for Civil Defence workers but for the civilian population as a whole. The relief is extended by Clause 37 to the estates of all persons who are killed as a result of operations of war, whether engaged in Civil Defence duty or not, so


we are going a good deal further in that direction than the hon. and gallant Gentleman had in mind. His Clause referred only to persons killed when on Civil Defence duty, whereas we say, not only on Civil Defence duty, but if they are killed as the result of operations of war, they will get the same relief as is applicable to the Armed Forces and the Mercantile Marine. There are some modifications of detail, the only one which I need mention being that death must take place within 12 months of the injury, because of the difficulty of certifying. There is no Department which is in a position to make a statement definitely on that point. The hon. and gallant Gentleman will see that while we cannot go all the way with him in removing all Death Duties from such estates, we have already gone a long way in extending the present concessions to the whole field of the population who may suffer death from enemy action. Seeing that that is the position, I hope my hon. and gallant Friend, and the hon. and gallant Gentleman for whom he moved this Clause, will agree that we have gone a long way in these difficult times. Everyone would wish to do so, because, after all, nothing in the way of tax remission could possibly recompense those whose relatives are killed, or could possibly assuage their grief. But this is something which can be done on the material side by this House, which in any case would extend to those so bereaved our sincerest sympathy.

Lieut.-Colonel Windsor-Clive: I am obliged to the right hon. and gallant Gentleman for what he has said, in view of which I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

First and Second Schedules agreed to.

THIRD SCHEDULE.—(Amendments of Paragraph 3 of Part I of the Seventh Schedule to the Finance (No. 2) Act,I939.)

Mr. Graham White: I beg to move, in page 37, line 29, after "nature,") to insert:
 including contributions made and indemnities given under Part I of the War Damage Act, 1941, and premiums paid under policies issued under Part II of the said Act so far as the same are attributable to the buildings, plant and machinery, respectively.

This will enable my right hon. Friend to remove an anomaly in the treatment of contributions under the War Damage Act and, at the same time, enable him to close our session to-day on the general note of concession and conciliation. Briefly, the anomaly to which I wish to draw his attention and which, in the minds of some people at all events, is inequitable, is that in Section 82 of the War Damage Act contributions are stated to be regarded as capital outlays in every case and are not therefore chargeable for taxation purposes. I do not propose for a moment to argue that very important consequences do flow from it from the point of view of various countries, many individuals and, may I add, of the Treasury itself. That is the way those charges are treated under the War Damage Act, but when we come to the Third Schedule of the Finance Bill, now under discussion, we find that quite a different treatment is followed. This Schedule gives an allowance for wear and tear calculated at net cost which does not include war damage contributions. That is, as I said, considered by many people to be Inadequate. Briefly, treatment ought to be the same under these two Acts, and it is for that reason and to allow the matter to be cleared up that I have moved the Amendment.

Sir K. Wood: I wish I was able to make the concession to my hon. Friend on personal grounds, as he knows. He and I had very happy associations many years ago. But I have to keep in the stern path of duty to the end, and do justice and safeguard the revenue to the end of this Bill. I regret that I cannot accept this Amendment. What it is in fact seeking to do is to override Section 84 of the War Damage Act of 1941, which we passed only a short time ago. That Section, I would remind my hon. Friend, provided that no payment or premium under Parts I or II of the Act shall be allowed as a deduction in computing profits for the purpose of Excess Profits Tax or any other taxation amendment. The Amendment he proposes would in fact increase the net cost of buildings, plant and machinery by the amount of contribution given and the indemnities given under Part I of the War Damage Act and premiums paid under policies issued under Part II so far as they are attributable to the buildings, plant and machinery respectively. It is under these circum-


stances that I feel I cannot, after this matter has been so recently considered by the House, now ask the Committee to reverse the decision to which we came.

Mr. White: Having regard to the tone in which the Chancellor referred to this matter, and his explanation, and in the hope that at some later stage he will give attention to it, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule agreed to.

Fourth and Fifth Schedules agreed to.

Bill reported, with Amendments; as amended, to be considered upon the next Sitting Day, and to be printed. —[Bill 36.]

The remaining Orders were read, and postponed.

It being after the hour appointed for the Adjournment of the House, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.